Recovering Commercial Rent Arrears and The Commercial Rent (Coronavirus) Act 2022 – Where Are We Now?

As detailed in our previous article, as a result of the Covid-19 pandemic the Government implemented The Coronavirus Act 2020 which, amongst other things, offered protection to Tenants of commercial premises by imposing a moratorium preventing Landlords exercising most of the usual remedies for the recovery of rent arrears. A lot has happened since then, but where we are now?

The Commercial Rent (Coronavirus) Act 2022 (“the Act”)

The moratorium imposed by the Government expired at the end of March 2022.

To prevent Landlords taking immediate action in relation to outstanding arrears, the Government implemented the Act, which offered a further period of protection to Tenants, preventing Landlords from exercising their usual remedies in relation to ‘Protected Rent Debts’, those being rents due under a tenancy between 21 March 2020 and 18 July 2021 when the business in question was subject to a closure requirement.

The Act implemented an arbitration scheme which entitled both Landlords and Tenants to refer matters to an Arbitrator to decide whether the Tenant was entitled to relief in relation to their protected rent arrears, but the deadline for the matter to be referred to arbitration was 25 September 2022.

Beyond 25 September 2022

In the event either Landlord or Tenant did not refer the matter to arbitration by 25 September 2022, all protection offered by the Act in relation to the rent arrears is lost.

The result being that a Landlord could exercise their usual remedies (as set out below) and, irrespective of the financial position that the Tenant is in as a result of the Covid-19 pandemic, it could not use is it as a defence to any claim or remedy exercised by the Landlord.

This will be welcome news for Landlords of Tenants who, despite being in strong financial positions, have refused to settle arrears on the basis that the Act afforded them protection.

Tenants still in arrears who were reliant upon the protection of the Act and did not refer matters to arbitration should be conscious of their vulnerability to any of the remedies available to the Landlord.

Options for Landlords

Now that it is “open season” in relation to commercial rent arrears, Landlords should ensure they seek advice as soon as possible in relation to the outstanding arrears. Taking steps to recover the debt sooner, rather than later, will improve the likelihood of recovery and avoid further arrears accruing which may see the Landlord recover pence on the pound in the event of the Tenant becoming insolvent.

As a brief reminder, some of the options open to Landlords are:

 

  • Forfeiture of the Lease – however, Landlord’s will need to ensure that they have not waived their right of forfeiture in respect of the previously protected arrears before forfeiting the lease;
  • Issuing Court proceedings for the recovery of the debt;
  • Commercial rent arrears recovery (CRAR);
  • The service of a statutory demand and the subsequent presentation of a winding-up petition; and
  • Pursuing former tenants that are subject to an Authorised Guarantee Agreement and/or pursuant guarantors

If you would like any assistance in relation to issues relating to commercial rent arrears, please contact Mike Lewis or George Faulkner of our Real Estate Litigation Team.

 

 

Karen Timon

She works closely alongside Michael Lewis, and George Faulkner to assist their clients and ensure all matters are dealt with swiftly and to the Sherrards standards.

Enough said.

Achieving vacant possession for our client.

Sherrards’ Real Estate Litigation and Residential teams worked together to help our client to get vacant possession.

Vacant possession means the property must be empty on the day you complete your purchase or sale of it. 

The £5million property in Kensington had been sold subject to contract, however, there was a tenant in the property who was refusing to leave which was jeopardising the sale.

Proceedings were issued in the High Court.

Michael Lewis and his team worked hand in hand with our Residential Real Estate department in order to provide vacant possession and a successful outcome for our client and the sale of their property.

Sherrards help client Global Infusion Limited with dilapidations claim

At the end of the Lease the Landlord served a substantial dilapidations claim. Mike and the team used arguments involving a section 18 valuation to significantly reduce the Tenant’s liability. 

The team worked closely with Brasier Freeth one of the leading surveyors in Hertfordshire to help resolve this matter for our client.

George Faulkner

George has a broad real estate practice encompassing landlord and tenant matters, adverse possession, rights of way, covenants, nuisance, trespass and more.

His clients appreciate his straightforward and down-to-earth approach. He knows the stress litigious disputes can bring, so he ensures his advice is free of legal jargon and enables his clients to fully understand their position.

He is eager to build strong relationships with his clients to understand them and their businesses. This helps him to give his clients advice that is tailored for them and their objectives.

That’s it. No fuss, just facts.

Sherrards’ Real Estate Litigation team advise property client obtain vacant possession from Rent Act Tenant

One property in the portfolio had a Rent Act tenant, but it was suspected that the Rent Act tenant no longer resided at the property.  A claim was issued on the basis of abandonment.  However, papers were served suggesting the tenant was returning from working abroad

Michael Lewis and the team issued proceedings and the matter went to the High Court. In the days before trial the team managed to agree a successful settlement for our client.

 

Sunira Patel

Sunira much prefers face to face or phone conversations with clients, to emails, finding it the most effective way to understand their concerns and objectives.

She is also enthusiastic about networking, evident from her involvement in Horizon Young Professionals Networking. She helps to organise the group, which brings together young professionals from Sherrards and other London firms, to share their experiences, ideas and contacts.

Sunira focuses on providing well-researched and pragmatic advice and building constructive working relationships with clients. Their comments suggest they appreciate her approach; we’d say that too, if you asked us.

Michael Lewis

Mike’s clients range from International and UK based developers, retailers, landlords and high net worth individuals. He works closely with them to achieve their objectives and they appreciate him for his unpretentiousness and “refreshing” approach to the law.

He enjoys being an active member of the St Albans business community and has held positions such as Chairman of the St Albans Business Improvement District (BID) and he is a Director of the St Albans City of Expertise.

He finds meeting people to be the best form of business development, and this is something he instils in his team, who are encouraged to go out and do the same.

Don’t believe us? Check out Mike’s reviews on The Legal 500

Those are the facts, pure and simple.

Real Estate Litigation