Extension of Protection for Commercial Tenants Extended
The Government has announced that it is further extending the restrictions on landlords’ ability to commence enforcement of breaches of leases including forfeiture. These measures are extensive with the principal aim of protecting businesses which have been unable to trade during the pandemic.
The measures include the following:
Forfeiture
The existing measures in place to protect commercial tenants from forfeiture on the ground of rent arrears will be extended to 25 March 2022.
Statutory Demands and Winding-up Petitions
Statutory demands and winding-up petitions will remain restricted for a further 3 months to protect companies from insolvency proceedings where their debts relate to the pandemic.
Ring-Fencing of Rent Arrears
The Government has indicated that it will introduce legislation to ring-fence rent arrears that have built up due to a business having to remain closed during the pandemic.
Landlords and tenants will be required to come to an agreement such as to accept payment of a lesser sum or to agree a payment plan for the arrears to be paid. These proposals will be awaited with interest by both landlords and tenants.
Commercial Rent Arrears Recovery
The minimum net unpaid rents which must be outstanding before a landlord can commence commercial rent arrears recovery (CRAR) will remain at 554 days as being just under 5 quarters’ rent.
Commercial Considerations
The Government has reiterated that tenants who are able to pay their rents must continue to do so. Many landlords and tenants have worked constructively during the pandemic in relation to rent and other lease terms.
It remains the case that early and constructive engagement is in the best interests of both landlords and tenants for arrears further accrue.
It remains an option for landlords to issue court proceedings to recover rent arrears unless or until the forthcoming legislation makes any changes to the same.
Some landlords continue to commence forfeiture action where tenants are in breach of other covenants of their lease such as where there is an unauthorised sub-letting or assignment.
Butcher & Barlow LLP
Our specialist landlord and tenant team continued to work with clients and their professional advisers across multiple industry sectors to provide advice on how best to manage their portfolios including the recovery of rent and service charges during this period.
The Landlord and Tenant Team can be contacted on 01606 334309.