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Commercial Rent (Coronavirus) Act 2022 – effect on commercial rent arrears and remedies

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United Kingdom

The Coronavirus Act 2020 restricted the exercise of certain landlords' remedies in respect of recovering commercial rent arrears from business tenants. The Corporate Insolvency and Governance Act 2020 also imposed restrictions on a landlord's ability to pursue insolvency proceedings in respect of a defaulting tenant company. The restrictions on landlords' remedies under these Acts were lifted on 25 and 31 March 2022 respectively.

However, further temporary restrictions have now been imposed under the Commercial Rent (Coronavirus) Act 2022 in respect of a landlord's ability to recover arrears of rent from commercial tenants whose businesses were subject to Covid restrictions during the period 20 March 2020 to 18 July 2021, defined as the "protected period" under the 2022 Act.

The table below shows the effect of the lifting and imposition of each of the aforementioned restrictions, and is intended to provide a quick-view guide as the remedies available to landlords to recover arrears of rent from commercial tenants following the enactment of the 2022 Act. This guide is not, however, intended to provide legal advice; before taking any action, please contact one of our team of specialists for legal advice.

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Remedies "Protected rent debt"[1] Rent due from 19 July 2021 to 24 March 2022 Rent due from 25 March 2022
Forfeiture
Peaceably re-entering the property or commencing court proceedings for possession of the property for non-payment of rent.
No Yes[2] Yes[3]
CRAR (Commercial Rent Arrears Recovery)
Landlord's right to instruct an enforcement agent to take control of, and sell, a tenant's goods to recover arrears of rent.
No Yes Yes
Serving Section 81 Tribunal Courts and Enforcement Act
Landlords who are entitled to use CRAR against the immediate tenant can require unpaid rent to be paid by the sub-tenant direct.
No Yes Yes
Statutory Demand (restriction to be lifted 31 March 2022)
A written demand for payment of debt within 21 days (as a precursor to either winding up or bankruptcy).
No Yes Yes
Winding Up Petitions (restriction to be lifted 31 March 2022)
An application to Court to place tenant company into compulsory liquidation (i.e. to wind-up company)
No Yes Yes
Administration Order
Landlord creditor appointing administrator to be appointed in respect of tenant company.
No Yes Yes
Bankruptcy Petitions
An application to Court for the bankruptcy of an individual business tenant.
No Yes Yes
Debt Claim / Court proceedings
Issuing of Court proceedings to recover unpaid rent.
No Yes Yes
Rent Deposit
The ability of landlords to withdraw from the rent deposit held to recover arrears of rent.
No Yes Yes
Pursuing a Guarantor
The ability of landlords to pursue a person who has guaranteed the obligations of the tenant, for rent arrears.
No[4] Yes Yes
Arbitration
Award based on the viability of the tenant’s business if relief granted (applying the principles in the Act[5]) the arbitrator can write off all or part of the debt, give the tenant further time for payment (up to 24 months) and/or reduce or write off interest payable.
Yes No No
 
 
If you have any queries regarding the remedies above, please contact a member of our market-leading real estate litigation team - Real Estate Litigation | Fieldfisher
Antony Phillips – Head of Real Estate (Antony.Phillips@fieldfisher.com)
Owen Talfan Davies - Partner (Owen.Talfan.Davies@fieldfisher.com)
 
[1] "Protected rent debt" refers to rent arrears falling due during the "protected period" under the 2022 Act, i.e. between 20 March 2020 to 18 July 2021. The "protected rent debt" period will differ depending upon the last date on which the tenant's business was subject to Covid restrictions, for example the "protected rent debt" for non-essential retailer is likely to be 21 March 2020 to 12 April 2021 (when non-essential retail was allowed to re-open), whereas the elements of the hospitality sector remained subject to Covid restrictions until 18 July 2021 and, for which the "protected rent debt" will be the entire "protected period".
[2] Unless action taken by landlord after 25 March 2022 which affirms the continuation of the lease, thereby waiving the right to forfeit.
[3] Unless action taken by the landlord which affirms the continuation of the lease after date on which the right to forfeit arises for non-payment of such rent. 
[4] In addition, the guarantor may also seek a stay of any existing debt claim pending the result of the arbitration process.
[5] The award should be aimed at preserving or restoring the viability of the tenant’s business (so far as that is consistent with preserving the landlord’s solvency), and the tenant should, so far as consistent with this principle, be required to meet its obligations to pay the protected rent debt in full and without delay.

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