Recovery of Outstanding Commercial Rents during Covid-19
Linden Talbot looks at recent changes to measures implemented by the government to protect commercial tenants.
In a step to mitigate the economic fallout caused by Covid-19, Parliament introduced extensive protections for commercial tenants. Set out below are the most recent developments in these protections, in particular Forfeiture and the CRAR Regulations.
The Coronavirus Act 2020 came into force on 25 March 2020 and, with immediate effect, negated the ability of landlords to recover outstanding rents for properties subject to commercial lease agreements.
Section 82 of the Act essentially precludes landlords from utilising forfeiture pursuant to a tenant’s non-payment of rent by postponing forfeiture proceedings. This applies to most business tenancies and even includes agreements whereby the protections afforded under the Landlord and Tenant Act 1954 have been contracted out.
The postponement was to run from 26 March 2020 to 30 June 2020. However, this end date has been gradually deferred, with the most recent deadline (published by the Government last week) being 31 December 2020.
The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 took effect from 25 April. This temporarily modified the previous 2013 enforcement regulations with the aim of protecting struggling tenants from landlords that deploy hard-line rent collection options.
The minimum amount of net unpaid rent that must be outstanding before commercial rent arrears recovery can occur was changed to 90 days (a substantial increase from the 7 days previously required). This increase will remain as long as the forfeiture protections under The Coronavirus Act 2020 are in place.
However, since April the required amount of rent in arrears has steadily increased, following the timeline set out below:
– from 24 June 189 days’ rent;
– from 29 September 276 days’ rent; and
– from 25 December 366 days’ rent.
The robust methods of rent collection previously utilised by landlords are not currently available. Consequently landlords and tenants must work together with a long-term perspective to find amicable alternative solutions.
Nevertheless, further extensions to the protections set out above seem likely if we find ourselves in a second lockdown.