Insights

Commercial Tenant Update: Moratorium Extension to 30th June 2021

On 9th March 2021 further regulations were made to extend the moratorium on forfeiture action for non-payment of rent until 30th June 2021 per The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2021 which come into force on 31st March 2021.

Landlords will be prevented from taking any forfeiture action for non-payment of rents or other sums (including service charges and insurance rent) during the period between 26th March 2020 to 30th June 2021.

The current extension which was due to end on the 31st March was purported by the Government to be the final moratorium extension for forfeiture, however in bad news for commercial landlords, the Government has deemed further support necessary for commercial tenants.

Some landlords believe the government restrictions are being abused by a few tenants who are still trading and have the means to pay, but are refusing to do so in order to negotiate rent reductions or improve short-term cash-flow.

Forfeiture action however does still remain available as an enforcement method to Landlords in respect of breaches other than non-payment of rent.

Commercial Rent Arrears Recovery

The Government also intends to extend the restriction on the Commercial Rent Arrears Recovery (CRAR) procedure past 31st March 2021 to 30th June 2021.

Under CRAR, if a tenant is in arrears of a certain level of rent, a Landlord can serve a notice on the tenant demanding payment of the arrears. If the sums are not repaid, the landlord can instruct an enforcement agent to follow a statutory procedure and seize assets held by the tenant. Those goods would then be sold at auction and the proceeds of sale used to repay the arrears owed to the landlord.

Regulations will be laid before parliament to increase the total number of days for which rent must be outstanding to use CRAR to 457 days between 25th March 2021 and 23rd June 2021, and 554 days between the 24th June 2021 and 30th June 2021.

The practical effect of this extension is to further protect tenants who do not pay the upcoming March and June quarter rents.

Moratorium on the statutory demand/ winding up route

Per the Corporate Insolvency and Governance Act 2020 winding up petitions (made from 27 April 2020 until 31 March 2021) and statutory demands (made from 1 March 2020 until 31 March 2021) were temporarily halted where a company was unable to pay its bills because of the impact of coronavirus.

It is not yet clear whether or not the Government intends for the extension to the moratorium on the statutory demand/winding up route to be final although a further extension is likely.

Alongside the extensions, the UK Government has also announced a review of “outdated commercial landlord and tenant legislation”, to address concerns that the current framework does not reflect current economic conditions and realities and will consider a broad range of issues including the Landlord & Tenant Act 1954, different models of rent payment, and the impact of COVID-19 on the market.

Although correct at the time of publication, the contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.