More bad news for commercial landlords

Elizabeth Shaw Elizabeth Shaw 08 July 2021

The Government recently announced further restrictions preventing eviction of commercial tenants for non-payment of rent.

Wake Smith’s property litigation solicitor Elizabeth Shaw looks at the implications for commercial landlords.

Forfeiture/Right of Re-Entry

The temporary suspension of landlords rights to forfeit business leases for non-payment of rent have been extended until 25 March 2022 for all businesses. 

However, the Government has made it clear that tenants are encouraged to pay rent in accordance with their lease or any agreed concessionary arrangements.

This does not impact on the landlord’s rights to take enforcement action for breaches of covenants other than non-payment of rent.

Commercial Rent Arrears Recovery (CRAR)

The limitations on CRAR will also remain in place until 25 March 2022. A landlord cannot utilise CRAR unless there are at least 544 days outstanding rent.

Statutory Demands and Winding Up Petitions

The current restrictions which were due to expire on 30 June 2021 will now continue for a further three months until the end of September 2021. The only exception is if the landlord can prove that the company would have been insolvent even without the Pandemic.

New Provisions

Whilst the detail is awaited, there is also to be a ring-fencing of arrears built up by businesses affected by Pandemic trading restrictions. Landlords are expected to share the pain. If landlords and tenants cannot agree there is to be a new mandatory and binding arbitration procedure.

It is not clear how this will work if the leases never contemplated arbitration as a method of dispute resolution.  It is therefore not clear how the statutory imposition of arbitration will interfere with the contractual bargain that the parties entered into.

Clearly these new provisions will provide breathing space for tenants.

It is also not clear how this ring-fencing will work i.e. will it cover all rent since March 2020 or just specific periods of mandatory closure. What about those business that have been able to partially trade for example take-away services as opposed to eat in?

Court proceedings

For the time being at least, there is no change to the landlord’s right to threaten and pursue County Court or High Court proceedings to recover the debt. More recently the Courts have found favour with the Landlords and have awarded summary judgment on arrears claims.

That said, we will expect the new legislation to include provisions to prevent landlords from circumventing any new ring-fencing/arbitration rules. Landlords therefore may wish to consider whether it is worth the cost of starting new claims now for pandemic arrears.

For advice on landlords matters contact Elizabeth Shaw at Wake Smith Solicitors on 0114 266 6660 or at [email protected] 

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