PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Under the Coronavirus Act 2020 introduced on 25 March 2020, the Government restricted the right for Landlords to forfeit leases for non-payment of rent because of COVID-19, by a suspension that lasts until 30 June 2020, subject to extension.
However, on 23 April the Government set out its plans to introduce additional temporary measures, which will be included in the forthcoming Corporate Insolvency and Governance Bill, to restrict a Landlord’s ability to enforce rent arrears. Measures include:
- Temporarily voiding statutory demands and winding-up petitions issued to commercial Tenants – any winding-up petition must first be reviewed by the court to ascertain why an occupier is unable to pay its debts and if it is determined to be as a result of the pandemic, the law will not permit petitions to be presented or winding-up orders to be made;
- By way of secondary legislation, limiting the use of Commercial Rent Arrears Recovery to cases where the tenant owes more than 90 days of unpaid rent.
The new legislation to protect Tenant’s will be in place until 30 June, but could be extended in line with the moratorium on commercial lease forfeiture.
This will restrict any tangible threat of action that a Landlord has against non-paying tenants. Understandably, the objective is to safeguard jobs and save businesses suffering from extreme cash flow difficulties due to the current lockdown, but it is difficult to see how the new legislation can distinguish between those who do or do not have the funds to pay. Given that many of those businesses are already benefiting from business rates holidays and furloughed wages subsidised by the Government, there may be questions as to whether the correct balance has been achieved.
Whilst the Government does recognise the strain that the new measures will have on Landlords, and has committed to working with banks, investors and lenders to develop a policy for tackling delayed loan repayments, we must reiterate that Landlords and Tenants need to work together. Occupiers should not abuse these concessions; indeed those businesses who are able to meet their liabilities should continue to do so, for the long-term well-being of the country’s economy.
Draft legislation to ascertain how the new measures will work in practice, is awaited.