Extension to ban on forfeiture and restrictions on landlords’ remedies
The current pandemic represents an unprecedented challenge for both tenants and landlords. The government has acknowledged that whilst some of the temporary restrictions are being lifted, the economic disruption of Coronavirus will continue for some time.
In light of this, the government has announced its intention to extend the period of the temporary restrictions on landlords’ remedies against defaulting tenants. This includes forfeiture, Commercial Rent Recovery (CRAR), statutory demands and winding up petitions.
- Amends the Coronavirus Act 2020 to extend the time period for suspension of the forfeiture of evictions from 30 June to 30 September 2020;
- Prevents landlords using CRAR unless they are owed 189 days of unpaid rent. This measure will be in force until 30 September 2020; and
- Amends the Corporate Insolvency and Governance Bill to extend the temporary ban on the use of statutory demands and winding-up petitions where a company cannot pay its bills due to coronavirus until 30 September 2020.
This means that no business will be forced out of their premises if they miss a payment in the next three months and landlords cannot use statutory demands and winding up petitions as an enforcement tactic to put pressure on their tenants to pay the rent. The government hopes that these measures will encourage parties to try to agree a way forward that is acceptable to all.
It’s important to note that the measures do not remove the obligation to pay rent. It simply delays the opportunity for landlords to enforce the debt. Once the restrictions are lifted, landlords will be able to use their usual remedies for any unpaid rent owed during the restriction period. The restrictions do not prevent default interest accumulating for late payment of sums due, drawing down on any rent deposit, pursuing guarantors or using debt recovery court proceedings through the court.
Alongside this, the government has issued a Code of Practice for Commercial Property Relationships to provide clarity for businesses and to encourage best practice between parties. The Code is not binding but encourages tenants to continue to pay their rent in full if they are in a position to do so and acknowledges that landlords should provide support to businesses if they are able to. The Code can be found here.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.