COVID-19: NEW PROTECTIVE MEASURES FOR COMMERCIAL TENANTS

Measures were announced by the government on 23rd April 2020, designed to protect tenants of commercial property from aggressive rent collection, potentially pushing viable businesses into insolvency.
 
The measures are in addition to the temporary ban on forfeiture (evicting tenants) for non-payment of rent introduced by Section 82 of the Coronavirus Act 2020 which became effective on 25th March 2020. The ban on forfeiture relates to commercial leases and is effective from 25th March 2020 until 30th June 2020.
 
The key points of the latest measures are as follows:
 
The government will retrospectively ban the use of statutory demands between 1 March and 30 June 2020 along with the temporary ban on winding up petitions presented from 27 April to 30 June, where a company cannot pay its rent bills due to coronavirus.
 
The government will prevent landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed at least 90 days of unpaid rent (the previous minimum was 7 days of rent arrears).
 
These new measures have not yet been enacted but are expected to be fast-tracked through Parliament and could become law in a matter of weeks. In the interim, tenants should be mindful of the risks of having a winding up petition served against them. Whilst the Companies Court have, from 23rd March 2020, adjourned all winding-up petitions for a minimum of three months, the existence of a served petition could inhibit a business’ ability to pay its suppliers without the benefit of a validation order from the courts.
 
Once enacted, the announced measures will provide much needed relief for some  tenants  although it is worth noting that full details of the restrictions have not yet been announced. For example, the criteria for assessing tenant’s inability to pay rent has not been clarified. The new measures may adversely impact many commercial landlords who will have fewer  remedies to pursue rent arears.
 
It’s important for tenants to recognise that these measures only serve to defer payment of rent and service charges. The concern is the current potential cliff edge of 30th June 2020 when tenants will have to pay these deferred liabilities unless further legislation is enacted to provide  a mechanism for gradual payment of rent arrears. 
 
Whilst these  measures bring options and flexibility for tenants, we recommend that tenants take legal advice if they have any concerns and also consider alternative options such as negotiating rent holidays or a switch from quarterly to monthly rent payments.