Temporary ban on Landlords’ “aggressive” rent recovery actions
The options open to commercial landlords to recover unpaid rent are to be further reduced but perhaps not by as much as the government intended. A moratorium on forfeiture for non payment of rent until 30th June was announced several weeks ago but last Thursday (23rd April) the government announced its intention “to introduce temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the coronavirus pandemic.”
The government is proposing to temporarily ban the use of statutory demands and winding-up orders where a company is unable to pay its bills due to coronavirus and is also introducing secondary legislation preventing landlords using the CRAR procedures unless they are owed 90 days of unpaid rent. The announcement refers to “high street shops and other companies under strain” and it was not clear if it would apply to all commercial tenants, as the moratorium on forfeiture did, or a more limited category of tenants
The government acknowledges the difficulty landlords are facing by asking for tenants to pay rent where they are able to do so, but it is unlikely landlords will take much comfort from this as these changes may make it less likely that some tenants will enter into open discussion with their landlord.
One surprising feature of the announcement is that the threshold for use of CRAR is more than 90 days unpaid rent. This seems to ignore the fact that most commercial tenants still pay rent quarterly. A tenant who has not paid the March quarter rent owes more than 90 days and so the landlord, under the current announcement, should be able to use CRAR. It remains to be seen if the Government will further amend these provisions.
Several weeks into this crisis there is still little government support available to landlords. Although many landlords have been reluctant to take these actions to date, this announcement may well add to cashflow difficulties for landlords and there is concern that the measures may, in due course, be extended beyond 30th June.