Covid 19 - How can commercial landlords deal with rent arrears as we move towards a post pandemic era?

This article looks at the options for rent recovery available to commercial landlords prior to the Commercial Rent (Coronavirus) Bill coming into force. 

As a result of the Covid pandemic the government has introduced the Commercial Rent (Coronavirus) Bill and the code of practice for landlords and tenants for commercial property.  This includes a binding arbitration scheme if no agreement can be reached in respect of rent arrears.

In the meantime, below are some of the restrictions on recovery of rent that currently apply:

• Commercial rent arrears recovery (known as CRAR) Landlords are unable to use CRAR unless the minimum amount of net unpaid rent is equivalent to 554 days’ rent. This restriction will continue to apply until 25 March 2022
   
• Winding up petitions The government introduced further measures that came into force in October 2021 which mean that a petition to wind up may not be presented in relation to an “excluded debt”. An excluded debt is a debt which is “unpaid by reason of a financial effect of coronavirus” and includes rent and other sums due under a “relevant business tenancy”. Further restrictions are proposed under the Bill.
   
• Forfeiture Landlords are prevented from taking steps to forfeit a “relevant business tenancy” on the grounds of non-payment of rent and other sums falling due until 25 March 2022. Landlords can still forfeit a lease for other breaches.

Landlords may be able to take the following steps to recovery rent:

1. Action against former tenants and guarantors;
    
2. Drawing down from a rent deposit;
    
3. Debt recovery but this will be significantly impacted by the Bill when it comes into force, which will allow either party to apply for a stay of any proceedings started after 10 November 2021 for arrears that fall within the arbitration scheme to be established by the Bill.

We have expertise in acting for landlords and tenants who are faced with these issues. If you need advice in relation to this, we can help. We will work with you to review your position and determine the best possible outcome in line with your objectives.

For further information call Jill Lawton on 01689 887855 or by email Jill.lawton@cwj.co.uk.