The government has said that it is clear that where tenants can pay their rent, they should do so.
While landlords will be unable to forfeit commercial leases due to non-payment of rent, they may still be entitled to forfeit leases on other grounds, such as breach of covenants prescribed in the lease.
While forfeiture is one of the most powerful remedies available to a landlord where its tenant does not pay the rent, it is not the only one. Certain other remedies remain available.
Such remedies include:
A landlord of commercial premises may, if the rent is overdue by a specified number of days (see below), instruct a certified bailiff to attend at the premises that are the subject of the lease and leave a seven-day notice requiring payment of the rent.
If the rent is not paid in that time, the bailiff has the power to remove goods from the premises and sell them to cover the amount of rent owed.
The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 made changes to the CRAR requirements. Since 24 June 2020, these regulations have prevented landlords from using CRAR unless an amount of at least 189 days' rent was due.
This has now been increased to at least 276 days' rent from 29 September 2020, and will increase again to 366 days' rent from 25 December 2020. This restriction applies until 31 December 2020 subject to any further extension made by the government.
The Corporate Insolvency and Governance Act prohibits the presentation of a winding-up petition based on an unsatisfied statutory demand served between 1 March and 31 December 2020 (extended from 30 September).
Statutory demands can still be served, but no winding-up petition can be presented for failure to make payment pursuant to the demand before 31 December 2020.
The legislation also contains a restriction on presenting a winding-up petition between 27 April and 31 December 2020 unless it can be shown that coronavirus has not had a financial effect on the debtor or that the debtor could not have paid its debts even if there had been no such worsening of its financial position.
The option of commencing court proceedings for recovery of rent and service charges under Part 7 or Part 8 of the Civil Procedure Rules remains. However, the process is likely to be very slow given the adjustments that the courts are currently making in light of the pandemic.
If the landlord holds a rent deposit, and subject to the terms on which it is held, a landlord can retain deposit monies to cover rent (and often service charge) arrears.
However, as is the case in 'normal' times, the landlord then needs to look to the tenant to replace such sums, which may be a challenge under the present circumstances. In the short term, this may be an attractive remedy for landlords who hold rent deposits.
In many cases, landlords and tenants have been talking to each other about the current crisis and how they might work together to get through it – the impact of the crisis is being felt by both landlords and tenants, and no doubt those discussions will be on-going in coming weeks and months.
This article was authored by Emily Lockey in the real estate team at Fieldfisher.
For expert advice on these and other property-related issues, please make contact with our team of specialist contentious real estate experts.
For more information please visit Fieldfisher's COVID-19 content hub, we are updating this regularly with up-to-date information.
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