Lockdown 3.0: how landlords and tenants can navigate choppy waters
25th January 2021
With England once again be placed into a national lockdown, my phone has once again been firmly attached to my ear as I try to navigate around these difficult times for both commercial landlords and tenants.
On 9 December 2020 the UK Government announced a further extension to the moratorium on forfeiture of leases on the grounds of non-payment of rent or other sums due, and the presentation of winding-up petitions until the 31st March 2021. While the Government has said this is a “final extension”, given this Government’s tendency to perform U-turns I wouldn’t count on it and I certainly expect it to be extended in light of the latest lockdown.
There are also restrictions on Commercial Rent Arrears Recovery (CRAR) until the same date, which limits the recovery action that can be taken. The minimum level of arrears necessary to use CRAR before the 25th December to be 366 days’ worth of rent. This basically means only rent that fell due before 25th December 2019 can be recovered through CRAR at this time.
Can commercial landlords do anything to recover outstanding rent?
There are genuine cases of many commercial tenants having effectively lost any income stream at all because of the global pandemic, and commercial landlords should exercise caution before taking any legal action in respect of those tenants.
There are, however, also many commercial tenants who are taking advantage of the Covid-imposed limitations – the “can pay but choose not to pay” tenants.
There is no embargo on debt proceedings being issued against a defaulting tenant and a money judgment being obtained for the rent arrears. The realisation that a CCJ entered against a tenant, which may potentially impact upon their credit rating, may bring about a reality check that there is only so long that they can avoid paying the outstanding rent and/or refuse to engage with the landlord. I see no reason why, in such cases, a commercial landlord should not take such action – at the very least it may bring the tenant to the table to enter into a sensible dialogue with the landlord.
Landlords should also bear in mind their right to recover rent from former tenants who have entered into Authorised Guarantee agreements or any guarantors by serving s.17 notices, – remember that these must be served within 6 months of the arrears falling due.
What can tenants do?
I would urge all tenants to contact the landlord or their representatives to try and reach some sort of mutual agreement. The worst thing they can do is bury their head in the sand and avoid any contact. They need to be able to show that they have investigated what other options/assistance there is available in the form of further government grants, CBIL loans etc before approaching the landlord.
Landlords are also being hit by this pandemic. It would be naïve and wrong to assume that their landlord should automatically be providing large rent incentives to all their tenants.
The next three months will be challenging for the NG management department as we navigate these difficult times. We also await with bated breath what plans the Government have as they announced prior to the Christmas break that they would be carrying out a “review of the outdated commercial landlord and tenant legislation, to address concerns that the current framework does not reflect the current economic conditions”. On that one, watch this space.