Further Government Assistance to Business Tenants

Shortly before the Christmas break the Government announced a further extension to the measures already in place to protect businesses as a result of the Covid-19 pandemic, details of which we have set out in our earlier articles. We have summarised the measures relevant to commercial landlords and tenants below.

Forfeiture of commercial leases

A third extension to the ban on forfeiture of commercial leases, as a result of non-payment of rent by tenants, has been announced until the end of March 2021. This extension will bring the total period of the moratorium on forfeiture to just over one year and it appears to be bringing the protection awarded to commercial tenants in line with that awarded to residential tenants under the Coronavirus Act 2020. The government has said that this will be the final extension of the moratorium.

The Government has also announced a review of the commercial landlord and tenant legislation with the aim to facilitate better collaboration between landlords and tenants and to improve the leasing process to help the high street recover from the pandemic. We will update you with more details once available.

Commercial Rent Arrears Recovery ("CRAR")

CRAR is a procedure by which landlords can recover unpaid rent from tenants by appointing agents to take control of the tenants’ goods to be sold to pay the rent arrears. Before the pandemic, the level of net rent arrears required to enable landlords to use this procedure was 7 days. Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020 introduced as a result of the pandemic, have gradually increased the required level of rent and as of 25 December 2020 366 days' net rent arrears are required in order for a landlord to be able to use CRAR. As with forfeiture, this restriction on CRAR has been extended until 31 March 2021.

Protection for companies

The temporary ban on serving statutory demands on companies and filing winding up petitions against companies has also been extended until the end of March 2021. This measure relates to debt which has resulted from the effects of the Covid-19 pandemic on the debtor’s business.

In addition to this, directors of companies have been awarded a partial protection from personal liability for wrongful trading. Any damage to the company’s financial position between 26 November 2020 and 30 of April 2021 is to be disregarded by the court when assessing the level of the director's contribution to the company's assets as a result of wrongful trading. This measure was re-introduced on 26 November 2020 as part of secondary legislation passed to continue the protection originally awarded by the provisions of the Corporate Insolvency and Governance Act 2020, which suspended personal liability for wrongful trading between 1 March and 30 September 2020. This appears to leave a gap between 30 September and 26 November 2020, during which this protection will not apply.

If you have any queries relating to these measures and how they may affect you, please do not hesitate to contact one of the expert solicitors in our Property Litigation department:

Alan Dixon – Partner - 0207 549 7895 - A.Dixon@dklm.co.uk

Michael Adamson - Senior Associate - 0207 549 7872 - M.Adamson@dklm.co.uk

Agnieszka Nowak – Solicitor – 0207 549 7450 – A.Nowak@dklm.co.uk

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.