On 23 April 2020, the Business Secretary, Alok Sharma, announced that temporary measures would be taken to restrict the use by landlords of insolvency measures and commercial rent arrears recovery ("CRAR") for rent collection.
New restrictions on insolvency and CRAR
The reforms will target landlords who serve statutory demands, present winding up petitions on commercial tenants or threaten the use of CRAR, specifically:
- demands and petitions already made are to be temporarily voided;
- any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why - petitions cannot be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19 - this will be in force until 30 June 2020, in line with the moratorium on commercial lease forfeiture, and may be extended;
- secondary legislation will prevent landlords from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days' of unpaid rent.
This has been necessitated according to the Government by landlord activity characterised as "putting tenants under undue pressure by using aggressive debt recovery tactics".
Proposals were already in the pipeline to reform insolvency law, which are now likely to be amended and accelerated in the Corporate Insolvency and Governance Bill.
Existing restrictions on landlord enforcement
Landlords' ability to enforce payment of rent during the COVID-19 pandemic has already been severely restricted by:
The business secretary referred to the need for commercial landlords to consider other help available to them, including through the recent expansion of the Coronavirus Business Interruption Loans Scheme.
If you are a landlord or tenant unsure what do when faced with arrears, contact Howard Kennedy's real estate disputes team.