Commercial Tenants are protected from eviction until 25 March 2022 if the Tenant is in arrears. The Government have introduced a Commercial Rent (Coronavirus) Bill, which will establish a legally-binding arbitration process for Landlords and Tenants who have not already reached an agreement on unpaid rent. The intention is for this arbitration scheme to come into force on 25 March 2022.

Who benefits from the arbitration scheme?

Those businesses which were mandated to close, in full or in part from March 2020 until the date restrictions ended for their sector.

How to apply

Landlord or Tenant has 6 months from the date the law comes into force, with a maximum timeframe to pay of 24 months.

Can I issue a Winding Up petition?

A landlord cannot issue a winding up petition against a tenant in respect of unpaid rent which are unpaid as a result of the coronavirus.

Any other ways to get the rent?

A Landlord can still issue a debt claim for the unpaid rent. This can be counted against the Landlord in a subsequent Arbitration process

Prior to the pandemic- the Landlord had a number of different methods available to it. Below sets out the current procedures:

Forfeiture

Procedure – A landlord could peaceably re-enter the premises without notice and take possession of the premises without court action by changing the locks, effectively ending the lease – although relief from the courts could be sought and would be available to tenants if they paid arrears plus the landlord’s costs.

Restriction – Suspended from 26 March 2020 to 25 March 2022

CRAR Commercial Rent Arrears Recovery (or CRAR)

Procedure – This procedure allows a landlord to instruct an enforcement agent to take control of a tenant’s goods and sell them in order to recover the value of the rent arrears.

Restriction – CRAR cannot be used unless the tenant has rent arrears of at least:

  • 189 days’ rent on or after 24 June 2020 (but before 29 September 2020);
  • 276 days’ rent on or after 29 September 2020 (but before 25 December 2020); or
  • 366 days’ rent on or after 25 December 2020 (but before 25 March 2021); or
  • 457 days’ rent on or after 25 March 2021 (but before 24 June 2021);
  • 554 days’ rent on or after 24 June 2021. Note that the minimum net unpaid rent that must be outstanding will remain at 554 days – it is not being increased as it was in previous extensions of the restrictions.

Restriction on the use of CRAR has been extended until 25 March 2022.

Statutory Demand

Procedure – Statutory demands are often issued to pressure debtors into paying the sums due prior to more formal legal action in the form of a winding-up petition, although a landlord is not required to issue a statutory demand before issuing a winding-up petition.

Restriction – There is no longer any restriction on sending statutory demands. However, to the extent that a statutory demand is used for the purposes of presenting a winding-up petition, the actual petition will need to satisfy certain conditions

Winding-up petition

Procedure – A landlord that has not been paid could present a winding-up petition at court on the b basis that the Tenant company cannot pay its debts as they fall due.

Restriction – A petition cannot be presented, unless certain conditions are satisfied by the petitioning creditor. There is a requirement for a petitioning creditor to demonstrate that they have sought to negotiate repayment of the debt, before seeking to wind the debtor company up, by serving a 21-day warning notice. Also, a minimum of £10,000 will need to be owed in all circumstances before a creditor or group of creditors can present a winding-up petition.

Debt proceedings

Procedure – It is open to a landlord to issue debt proceedings in court to recover unpaid rent. It is a more lengthy and costly procedure.

Restriction – No restrictions. However, any court Judgment may be considered in an Arbitration scheme.

Administration order

Procedure – A creditor has standing to make an application to court for administrators to be appointed in respect of a company. Once appointed and an order is made a moratorium applies against certain actions against the company without the permission of the court. However, this is a more costly and complex method than presenting a winding-up petition and has not been commonly used in practice by landlords.

Restriction – None.

Rent deposit

Procedure – Many landlords hold a rent deposit on which they can draw when rent is not paid.

Restriction – None

Guarantee

Procedure – Landlords could also seek to recover rent from any third parties who have guaranteed the tenant’s liabilities under the lease.

Restriction – None

For further information on anything mentioned above, please contact Kate Maslen, Partner in the Dispute Resolution Team, by telephone on 01395 280389 or email katemaslen@wbw.co.uk.

WBW has offices in Torquay, Paignton, Newton Abbot, Exeter, Bovey Tracey,  Exmouth,  Honiton,  Sidmouth,  Launceston,  Axminster, Chard and Seaton.

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.