New law: COVID-related legal protections, for commercial tenants in arrears of rent in England, extended to 31 March 2021
Tenants of commercial property in England will welcome a further extension to temporary laws that protect them from certain legal actions by their landlords for arrears of rent, to 31 March 2021.
This update was published in Legal Alert - January 2021
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The new extension means that commercial landlords cannot forfeit a business tenancy for non-payment of rent, if the non-payment is due to COVID-19, until after 31 March 2021 – an extension to the previous expiry date of 31 December 2020. Landlords should note that the new period of protection includes the traditional March quarter day.
However, the government has indicated that this will be the last time it extends this protection.
In September 2020, the government also stopped landlords from bringing Commercial Rent Arrears Recovery (CRAR) proceedings against commercial tenants by increasing the amounts of rent that had to be in arrears before such proceedings could be brought. The CRAR rules say that commercial tenants whose rent is more than a certain amount in arrears can be given notice to pay and, if the tenant does not comply, the landlord can seize the tenant's assets and sell them at auction.
The government is now increasing the amounts of rent that must be in arrears even further, so that commercial tenants will continue to be protected against CRAR proceedings.
Landlords should also note that the temporary rules stopping them from using statutory demands against commercial tenants who are in arrears of rent (which, if the tenant fails to pay the arrears within 21 days, entitles the landlord to petition to have the tenant wound up) have also been extended to 31 March 2021, from the previous expiry date of 31 December 2020.
However, despite the above protections, landlords may still be able to take other steps against commercial tenants, such as forfeiting a lease for breaches other than non-payment of rent, using rent deposits, seeking rent from guarantors or simply going to court to recover rent – although they should consider taking professional advice on the costs and implications of each.
The advice given will often be that the landlord's best option is to engage with tenants they know or suspect to be in financial difficulty. In this respect landlords and tenants are expected to negotiate with each other in good faith about their relationship under a special government Code of Practice introduced in June 2020.
- Commercial tenants and landlords should consider whether to take specialist advice as result of the further extension, and check out the Code of Practice on the GOV.UK website.
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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