Except for provisions for Protected Rent Arrears, landlords can exercise the following alternatives:
• Winding-up petitions. Landlords can now serve Statutory Demands and file Winding Up Petitions against their commercial tenants with effect from 1 April 2022. This process can be very effective in cases where liability is undisputed and the debt is more than £750.
• Commercial rent arrears recovery (CRAR). The CRAR could not be exercised until 25 March 2022 if the Tenant’s rent arrears were from less than 554 days. However, from 26 March 2022, that limit has been retracted to pre-pandemic level of only 7 days’ rent arrears.
• Forfeiture. The exclusion on forfeiting leases for default of rent and or other arrears ceased on 25 March 2022. The typical relief period of 14 to 21 days that the lease provides a leaseholder to clear the arrears before the landlord can forfeit continues to be valid.
Waiver of the right to forfeit
Due to the implementation of Section 82(2) of the Coronavirus Act 2020 on 25 March 2020, it became impossible to waive the right to forfeit for non-payment of rent or other arrears other than by an express written waiver. This ended on 25 March 2022. From 26 March 2022 claiming or receiving the Lady Day 2022 rent or applying CRAR will give up the right to forfeit for all previous arrears (other than Protected Rent Arrears). To prevent any inadvertent waiver, landlords must now consider incorporating a rent stop in place.
Protected Rent Arrears
Any unpaid rent arrears such as rent, service charges, insurance rent, interest or VAT in respect of business tenancies which were forced to shut down during the pandemic will be "Protected Rent Debt" if accrued between 21 March 2020 and the date on which Covid restrictions impacting those specified business ultimately ended.
The main periods of protection are as follows:
• Period of protection for Non-Essential retail and leisure was between 21 March 2020 – 12 April 2021
• Period of protection for Garden Centres was between 21 March 2020 – 13 May 2020;
• Period of protection for Non-Hospitality and nightclubs was between 21 March 2020 - 18 July 2021.
The dates in respect of Welsh properties are slightly varied.
Reclaiming these Protected Rent Arrears is now set out in the Commercial Rent (Coronavirus) Act 2022.
Protected Rent Arrears are automatically set aside for 6 months i.e. until 25 September 2022. During this time landlords and tenants can either agree on how to deal with the arrears or either party can refer the dispute to statutory arbitration. The arbitrator can then make a binding award based upon the landlord’s or the tenant’s submissions regarding liability, timelines for payment, interests and other costs. Any such award made by the arbitrator must take into account the reasonable opportunity for the tenant’s business to survive and to avoid insolvency and also the landlord’s position in avoiding any further losses. During this period of arbitration all enforcement actions are prohibited in respect of Protected Rent Arrears.
For further information regarding commercial rent recovery or the new binding arbitration procedure, please do not hesitate to contact Mr. Bill Dhariwal on DDI: 01489 864 117 or E: bill.dhariwal@lawcomm.co.uk.
