Insights

Government announcement on tenant insolvency

Posted Friday 24th April 2020

The Government has previously announced a moratorium on forfeiture of commercial premises but left the matter of tenant insolvency open as a route for landlords that wanted to enforce the terms of their tenants’ lease obligations.

The Government has just announced new measures intended to further protect companies including in relation to corporate insolvency during the Covid-19 pandemic.

The link to the Government announcement is here.

This includes the following note:

“…the government will temporarily ban the use of statutory demands and winding up orders where a company cannot pay their bills due to coronavirus, to ensure they do not fall into deeper financial strain.”

In the notes to editors, the announcement further states:

“Under these measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19.

The new legislation to protect tenants will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.”

Although commercial rent arrears recovery (CRAR) has been an ineffective option for landlords during the lockdown with most commercial premises forced to remain closed, the Government have temporarily suspended CRAR as well.

This announcement will of course impact the leverage that landlords have had over tenants by serving statutory demands for non-payment of the March quarter’s rent. It remains to be seen what equivalent measures the Government will be introducing to protect landlords with regards to non-payment under their own mortgage facilities.

We have been advising both landlords and tenants on the options available to them during these challenging times. If you have any queries on how this announcement may affect your business or would like to discuss your options, you should not hesitate to contact Daniel Swimer, the head of our Property Litigation team.


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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