Authors

Saleem Fazal

Partner

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Stephen Burke

Senior Associate

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Emma Archer

Senior Associate

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Alicia Convery

Associate

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Authors

Saleem Fazal

Partner

Read More

Stephen Burke

Senior Associate

Read More

Emma Archer

Senior Associate

Read More

Alicia Convery

Associate

Read More

30 March 2022

RED Alert - Spring 2022 – 2 of 6 Insights

Commercial rent arrears: options to landlords following lifting of moratorium

Following the lifting of the moratorium on forfeiture for commercial rent arrears on 25 March 2022, commercial landlords are once again able to use numerous methods to either regain possession of their premises or recover the sums owed from tenants.

Whilst many landlords may be eager to press ahead with their chosen strategy, it is important to note that the below methods continue to be restricted where the arrears owed satisfy the definition of "protected rent debt" under the recently enacted Commercial Rent (Coronavirus) Act (the Act). The Act makes clear that any disputes over "protected rent debt" must be settled using the binding arbitration scheme established by the Act. We would therefore recommend that landlords carefully consider the extent to which the sums they are owed fall within the scope of the Act before taking any further action. You can find out more about the Act and the arbitration scheme in our recent article here.

The options available to landlords are as follows:

Forfeiture

  • Landlords are now able to forfeit the lease for any "unprotected" arrears which remain outstanding. If the tenant owes both protected and unprotected arrears, landlords will need to be clear which debt they are relying on when exercising their right to forfeit.
  • Landlords should also take note that the lifting of the moratorium has also removed the protections from waiving the right to forfeit. Those considering forfeiture should therefore take care not to act in any way which affirms that the lease is continuing and could constitute a waiver of the right to forfeit.

CRAR

  • As an alternative to forfeiting the lease, landlords can use the Commercial Rent Arrears Recovery (CRAR) procedure to seize tenant's goods and sell them to recover any unprotected arears owed.
  • Since June 2021, landlords were prevented from using this statutory procedure unless a sum equal to at least 554 days' rent was owed. However, the minimum amount outstanding before a landlord can exercise CRAR has now reverted to pre-pandemic levels and is the equivalent of 7 days' unprotected rent debt rent

Winding up petitions

  • Restrictions on the issue of winding-up petitions were imposed under the Corporate Insolvency and Governance Act 2020. Following a previous extension, these restrictions are due to end on 31 March 2022. As a result, from this date commercial landlords will once again be able to issue statutory demands and present winding up petitions against companies owing unprotected rent debt.

Debt proceedings

  • If a landlord is owed unprotected rent debt, it can still issue formal court proceedings in order to recover this debt.
  • Landlords should be mindful that the provisions of the Act apply to stay any debt proceedings which are issued on or after 10 November 2021 where all or part of the monies owed constitute protected rent debt. This moratorium will apply until the earlier of 24 September 2022 or the conclusion of an arbitration commenced under the Act. Consequently, where a tenant owes both protected and unprotected rent debt, landlords are advised at this stage to only issue proceedings in respect of unprotected rent to avoid the risk of their claim being struck out.

Arbitration

  • As stated above, the Act provides that all outstanding disputes relating to "protected rent debt" must be settled using the new arbitration scheme. We have recently provided an overview of how this scheme will operate here.

If you have any questions on any of the above options or would like to discuss your strategy, please contact a member of our specialist team.

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