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UPDATE: Commercial Rent Arrears Recovery changes

Apr 27th, 2020

The Business Secretary, Alok Sharma has over the weekend (23 April 2020) set out a new raft of measures aimed to protect high street shops and other companies under strain. These businesses will be asked to pay what they can during the coronavirus pandemic, in response to growing calls from amongst others, the British Property Federation. 

Statutory demands and winding up petitions issued to commercial tenants are to be temporarily voided in what will no doubt, be a relief for tenants who are struggling to pay their rent.

In these new measures, the government has banned the use of statutory demands made between 1 March 2020 and 30 June 2020 and winding up petitions presented from Monday 27 April until the end of June to ensure that tenant companies are not put under greater financial strain by aggressive measures taken by landlords to recover rent.

The measures will be included in the Corporate Insolvency and Governance Bill, which the Business Secretary set out earlier this month. 

The government also announced that it is laying secondary legislation to provide tenants with more time to pay the rent by preventing landlords from using Commercial Rent Arrears Recovery (CRAR) (which involves a landlord seizing tenant’s goods to the value of unpaid rent) unless and until there are more than 90 days of rent outstanding.

These measures are to complement the existing measures brought in on 25 March 2020 by the Coronavirus Act 2020 which put in place a moratorium on landlord’s ability to forfeit leases or bring (or continue) most possession proceedings against tenants.

The aim is clear, to safeguard the high street and millions of jobs by helping companies stay open and prevent permanent closure during this time. The government also called on those tenants who are able to pay their commercial rent to pay it or what they can, in recognition of the strains felt by commercial landlords at this time.

It remains to be seen whether further measures will now be put into place to provide some support to commercial landlords whether to protect or ease the payment terms of commercial mortgages and who are unable to recover rent, service charge or insurance premiums from their tenants during this time. 

It will also be interesting to watch whether the government will now come under further pressure to end these and the moratorium on forfeiture on 30 June because of the wide ranging impacts which prolonged measures will have on commercial landlords. 

The overall measure is clear though, landlords and tenants must continue to negotiate and collaborate during this period to ensure that a solution is found to the non-payment of rent and landlords will not now be able to use measures to collect rent which will have a profound effect on the long term health of a tenant’s business.

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