Commercial Rent Practices During COVID-19

27 Apr2020

The majority of Landlord and Tenants have been pragmatic and worked well together in relation agreements and debt management for commercial properties. By now, the majority of the UK Landlord and Tenants are aware that as a result of new Coronavirus Act 2020, commercial leases cannot be forfeited due to rent arrears, but this does not take away the obligation for the tenant to pay rent.

However, some Landlords have been using other means and procedures to attempt to recover rent without evicting the tenant. These measures included various debt recovery methods, such as, making applications for debt recovery to the Small Claims Courts, serving Statutory Demands, petitioning for Bankruptcy and Winding Up Orders.

The Government have taken these approaches as "aggressive rent collection methods" and "unfair practices".

To stop these practices, the Government will now ban the use of Statutory Demands made between 1 March 2020 and 30 June 2020.

As of 27 April 2020, through to 30 June 2020, winding up petitions made due to a company not being able to pay its bills as a result of Coronavirus are also banned. This is in an attempt to ensure that companies do not fall into deeper financial strain and the measures are to be incorporated in the new Corporate Insolvency and Government Bill.

The Government is now also putting into place Secondary Legislation to allow tenants more time and "breathing space" to pay their rent, by preventing Landlords from directly jumping to using Commercial Rent Arrears Recovery (CRAR) if there is a debt which is less than 90 days old.

The intention behind this is to protect the High Street and prevent further damage or permanent closure of business. They are also trying to protect millions of jobs.

However, the Government, whilst requiring Landlords to give Tenants "breathing space" they have also made it clear, if a Tenant can afford to pay the rent or part of it, they should do so and are urged to recognise that Landlords are feeling the strain too.

These temporary measures are designed to recognise the pressures Landlords are facing but to encourage them to cooperate in the "spirit of fair commercial practice".

These new measures are in addition to the various provisions and packages the Government have put in place i.e. Coronavirus Job Retention scheme, deferral of VAT Payments for 3 months, Grants, 3 month moratorium on evictions for commercial tenants etc.

If you require any assistance or advice, please do not hesitate to contact Mohammed Rahman Commercial Property Solicitor on 01604 622101