Commercial Property Rent Arrears – What can a landlord do?
In order to protect commercial tenants against debt recovery actions during the Coronavirus pandemic, there are currently considerable restrictions on a landlord’s ability to recover outstanding rent.
A voluntary Code of Practice for commercial property relationships during the Coronavirus pandemic has been produced with the aim of reinforcing and promoting good practice amongst landlords and tenants. Landlords and investors are being asked to work together with their tenants if their tenants are unable to pay their bills due to the Coronavirus pandemic; although tenants should pay if they can afford to do so or should pay what they can.
What can’t a landlord do?
Under S82(1) of the Coronavirus Act 2020, there is no right of re-entry or right to forfeit under a business tenancy on the basis of non-payment of rent before 31 December 2020.
The relevant period was originally from 26 March to 30 June 2020. This was extended to 30 September 2020 and has now been extended again to 31 December 2020.
What might a landlord be able to do in certain circumstances?
Statutory demands/winding up petitions
The Corporate Insolvency and Governance Act 2020 has brought in restrictions relating to the presentation of winding-up petitions.
A landlord can still serve a statutory demand; however it rather loses its teeth as a winding up petition cannot be presented between 1 March and 31 December 2020 where a company is unable to settle its bills due to the Coronavirus pandemic.
A winding up petition can be presented if there are reasonable grounds that the Coronavirus pandemic has not been the cause of the financial difficulty or if the debt would have arisen despite the Coronavirus pandemic. The landlord will have to produce some evidence of this.
Commercial Rent Arrears Recovery (CRAR)
Further restrictions have been brought in regarding CRAR. A commercial landlord still has the CRAR option available; however, the period of rent arrears required to be able to exercise CRAR has been greatly extended. The periods are now as follows:
- From 29 September 2020 to 24 December 2020 – minimum of 276 days rent overdue
- From 25 December 2020 – minimum of 366 days rent overdue
What can a landlord do?
A landlord still has the following options available:
- Drawing down on a rent deposit
- Pursuing a guarantor
- Pursuing a former tenant
- Debt recovery claim
- Seeking rent directly from subtenant
- Forfeiture on other grounds (not unpaid rent)