Whilst the Coronavirus Act 2020 currently prevents commercial landlords from taking forfeiture action against their tenants for non-payment of rent the emergency legislation did not prohibit landlords taking other steps, such as issuing Statutory Demands, to apply pressure to their commercial tenants during these unprecedented times. Overall it appears that both commercial landlords and tenants are working well together to reach a resolution palatable to both parties, however there are reports that a minority of landlords and tenants are exploiting the new legislation to their advantage against the spirit of fair commercial practice. As a result further changes to law surrounding commercial property are expected imminently as suggested recently by Business Secretary, Alok Sharma.
We can expect further changes to include making all Statutory Demands and Winding Up Petitions temporarily voided if they are presented as a result of a company being unable to pay its bills due to the Coronavirus. Temporary changes to Commercial Rent Arrears Recovery (“CRAR”) are also expected which will prevent landlords using this method in an attempt to recover unpaid rental arrears unless there are 90 days or more of unpaid rent. Such changes no doubt will come as a big relief to those in the leisure, entertainment and retail sectors who have been left with no choice but to close their doors and suffer a dramatic decrease in revenue.
Whilst we can all appreciate the need for such temporary measures in order to protect the position of both commercial landlords and tenants there will undoubtedly still be a very small minority of profitable commercial tenants who may still proceed to withhold rent, despite their financial position allowing them to pay it in full if they so desired. As a result, landlords may now wish to consider other available options beyond forfeiture, issuing Statutory Demands or CRAR proceedings and may look to instead consider serving interim schedules of dilapidations on their tenants as a way to apply pressure to adhere to fair commercial practice.
Further information can be found at https://www.gov.uk/government/news/new-measures-to-protect-uk-high-street-from-aggressive-rent-collection-and-closure
If you are either a commercial tenant or commercial landlord requiring further advice and assistance as to what the recent changes in the legislation mean for you please contact Lauren Smith on 01922 707048.