Restrictions on remedies for commercial landlords extended

In response to the Covid-19 pandemic, the government introduced a series of measures restricting what a landlord can do where a tenant is not paying rent (the restrictions).

The restrictions were due to expire at the end of September, but, as the deadline approached, it became clear that the commercial property market was facing a slow recovery. So, unsurprisingly, they were extended to 31 December 2020.

A high level summary of the restrictions as they currently stand is as follows:

• Landlords cannot forfeit a lease for non-payment of rent
• Landlords cannot exercise Commercial Rent Arrears Recovery (CRAR) unless a minimum of 189 days’ rent is outstanding on or after 24 June 2020 – which is an increase both from the original seven days and the 90 days imposed during lockdown
• Any statutory demands issued are void and cannot form the basis of a winding up petition
• Winding-up petitions cannot be presented, unless it can be shown that the tenant company would have been unable to pay its debts regardless of the pandemic.

The remedies which remain open to landlords are:

• Drawing down on a rent deposit (if available)
• Issuing court proceedings to recover the sum as a debt from the tenant
• Pursuing a guarantor.

The government published a Code of Practice for commercial property relationships during the pandemic (the code). The overall aim of the code is to encourage landlords and tenants to work together. However, the code is not mandatory and so does not help where one party is simply refusing to engage with the other.

The restrictions and the code have been criticised for being too ‘tenant friendly’. Many landlords still have to meet their obligations to lenders without a key income stream. Now that the protection afforded to tenants by the restrictions has been extended until the New Year, it may be that more landlords start pursuing the remedies which remain available to them.

One thing is clear; as the New Year approaches, the question on everyone’s minds will undoubtedly be whether the restrictions be extended yet again?