Government announces temporary ban on Statutory Demands and CRAR
Landlords seeking to recover rent from their commercial tenants were dealt a further blow on 23 April 2020 when the Government announced further measures to protect commercial tenants during the lockdown period.
Whilst the full details will be ironed out when the proposed legislation is drafted and finalised, the Government’s press release states that, in an attempt to protect the high street in particular, there will be a ban on taking steps to recover rent by making a commercial tenant insolvent (i.e. serving a statutory demand or winding up petition) or by using CRAR to enter premises and take goods (unless the landlord is owed at least 90 days’ worth of unpaid rent).
The points of particular interest for landlords are:
- It appears the new restrictions will apply to all commercial tenants who cannot afford to pay the rent due to the Coronavirus, regardless of whether they are trading from the premises or elsewhere.
- There is no apparent intention to ban Court Proceedings to recover rents (although it is not clear whether enforcement of a Judgment will be prevented where a tenant asserts it cannot pay).
- Presumably, all tenants with cashflow issues (and many who could actually make payment) will seek to claim protection under the new legislation (although the Government has stressed that landlords and tenants should seek to co-operate and tenants who can afford to pay the rent, should pay it).
- Tenants who have agreed side letters providing for monthly or other payments may now seek to renege on these and landlords may be less willing to offer lease extensions in return for tenants deferring rental payments.
- Given the ban on forfeiture which is already in place until at least 30 June 2020, these measures may well cause substantial cashflow difficulties for landlords as they will be toothless to deal quickly with any tenant who claims they cannot afford at present to pay the rent.
- This marks a further shift in the Government's policy of protecting tenants rather than landlords and may hint at what the Government may do in response to calls from the tenant lobbyists who are loudly and publicly pushing the Government for a 9 months' rent holiday.
Dean is a Senior Associate in our Property Litigation team.