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Government extends moratorium on commercial evictions

 

The UK Government has announced an extension to the moratorium on commercial evictions, meaning landlords are unable to take action to recover possession of commercial property until 25 March 2022. The rationale for this is to allow landlords and tenants time to reach an agreement on any outstanding rent arrears which accrued during the lockdown periods without the threat of an eviction.

The Government believes that this strikes the right balance between protecting landlords and supporting those businesses that are most in need. However, the move has been criticised by the British Property Federation who believe it puts at risk essential investment by commercial property owners and the health of town centres.

This moratorium was first introduced in April 2020 and it was designed to assist struggling commercial tenants who had been impacted by the pandemic. The current restrictions impose various limitations to a landlord’s options for recovering unpaid rent from a commercial tenant.

Section 82 of the Coronavirus Act 2020 prohibits a landlord from taking action to forfeit the majority of leases, either by way of proceedings or peaceable re-entry, for non-payment of rent. The tenant remains liable for the rent as it falls due but the landlord cannot take action to forfeit the lease due to the accrued rent arrears until after the moratorium. If forfeiture proceedings had commenced before 26 March 2020, then any date for possession cannot be before the moratorium period expires.

The Government has also published a code of practice which strongly encourages landlords and tenants to act reasonably and collaboratively in dealing with rent arrears which have accrued during the pandemic. However, the Government has now confirmed that it will go further still and introduce legislation to ring-fence rent arrears which have accrued as a result of the pandemic. The legislation will allow for a period of negotiation between landlords and tenants to ascertain whether an agreement can be reached to reduce the rent arrears and/or establish a suitable repayment plan. If a suitable agreement cannot be reached, then a binding arbitration procedure will take place. It should be noted that the landlord cannot waive its right to take action by dealing with the tenant during the moratorium period, unless an express waiver is signed.

The Government has reminded tenants that they should have been paying rent during the lockdown periods if they could afford to and that all tenants should be paying rent once the restrictions on their sector are lifted.

The Coronavirus Act 2020 does not prohibit other types of rent enforcement action available to the landlord. Recovery options to consider include taking control of goods using the exercise of CRAR, recovery from existing guarantors, recovery from subtenants, debt recovery proceedings, statutory demands and winding up petitions. The Coronavirus Act 2020 does however place further restrictions on these options. They will not be available in all situations and careful consideration must be given to permitted timing before proceeding with any enforcement action. For example, restrictions have been placed on winding up petitions and statutory demands for a further three months until 30 September 2021 and, in order to exercise the CRAR procedure, a tenant must have been in arrears for a certain number of days depending on when the enforcement notice is served.

This is a complex and changing area, given the regular introduction of new legislation and guidance. We would recommend that any landlord seeking to take action, or any tenant struggling to pay rent, seek advice on the options available to them.

For more information, please contact Michelle Footer or one of our other specialists in Real Estate Disputes.

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