Covid-19 – Government extends moratorium on landlord action

Posted Wednesday 30th September 2020

The property industry and in particular the retail and hospitality sectors, has been greatly impacted by the COVID-19 pandemic.

Since March 2020, the Government has introduced and extended measures to assist tenants during the pandemic. Commercial tenants have benefitted by virtue of the Coronavirus Act 2020 from a prohibition on landlords forfeiting commercial leases for non-payment of rent. Restrictions have also been placed on landlords using the Commercial Rent Arrears Recovery (CRAR) procedure unless 189 days of rent have accrued. These protections for tenants were due to expire on 30 September 2020.

The Corporate Insolvency and Governance Act 2020 also prevented winding up petitions from being presented on the basis of a statutory demand, where that demand was served between 1 March 2020 and 30 September 2020.

The further extensions

As the number of COVID-19 cases rise for a second time, the following further extensions have now been introduced:

1. The protection from forfeiture of commercial tenancies for non-payment of rent under the Coronavirus Act 2020 has been extended to 31 December 2020.
2. The restrictions on the exercise of CRAR has also been extended to 31 December 2020.
3. The restrictions on the presentation of winding up petitions have been extended until at least 30 December 2020 unless the creditor has reasonable grounds for believing that:
   • Coronavirus has not had a financial effect on the company; or
   • the situation that the company is in would have happened even if coronavirus had not had a financial effect on the company.

The impact of these further extensions

1. Unless landlords and tenants have been able to agree terms, any unpaid rents due under the tenants’ leases are effectively being deferred until a later date and this will result in an increase in tenant debts. Contractual interest on arrears will also continue to accrue.
2. Some tenants could find themselves by January 2021 having to pay around 9 months’ of rent to their landlords if they have not been paying any rents since March 2020.
3. Landlords’ remedies are now restricted for a further three months. Landlords are only able to rely on rent deposits, bank guarantees, claims against former tenants or guarantors, or issuing a debt claim for the outstanding rents through the county courts.
4. There will in the meantime be a further immediate impact on landlords’ income and cash flow position.

Joelson have been advising landlords and tenants throughout the coronavirus pandemic on managing their property portfolios. If we can be of assistance, you should not hesitate to contact Daniel Swimer on 020 7580 5721.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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