UK: Government To Extend Protection For Commercial Tenants

On 19 June 2020, the Government announced its intentions to extend protections for businesses against eviction, seizure of goods and insolvency proceedings.

With the June quarter day approaching and little indication that businesses (particularly in the retail and hospitality sectors) are back on their feet, it is no surprise that the Government has announced an extension of current measures to enable businesses to cope with the effects of coronavirus (COVID-19) pandemic.

No Eviction

At present, landlords cannot exercise their rights to re-enter premises or forfeit leases if their tenants have not paid rent. This ban on evictions was due to end on 30 June 2020 under the provisions of the Coronavirus Act 2020.

However, the Government intends to exercise its powers to extend this period and has accordingly announced that no business tenant will be forced out of their premises for non-payment of rent until 30 September 2020 at the earliest. The Government has the power to extend this period further if necessary.

Limits on Seizure of Goods

The Commercial Rent Arrears Recovery (CRAR) procedure allows landlords to take control of their tenants' goods and sell them in order to recover an equivalent value to the unpaid rent. In April 2020, the Government introduced regulations which specify that until 30 June 2020, the procedure can only be used if landlords are owed 90 days of unpaid rent or more.

The Government now proposes to prevent landlords using the CRAR procedure unless they are owed at least 180 days of unpaid rent. It also intends to extend the relevant period so that this pre-condition will apply from 30 June 2020 until 30 September 2020.

Restrictions on Winding-Up

The Corporate Governance and Insolvency Bill ('the Bill') which is due to be enacted in the next few weeks will restrict the abilities of landlords to use the winding-up procedures against tenants who have not paid rent. The Bill limits creditors by temporarily banning the use of statutory demands and winding-up petitions where debtor companies cannot pay bills due to coronavirus.

These restrictions will have retrospective effect and were initially due to apply until 30 June 2020 or one month after the enactment of the Bill. However, an amendment has been put forward to extend these restrictions until 30 September 2020.

Conclusion

Landlords' options to pursue tenants in arrears of rent continue to remain very limited until at least 30 September 2020. It remains to be seen whether these restrictions will be extended beyond 30 September 2020. Despite the restrictions, landlords still have the option of commencing civil proceedings in respect of the unpaid rent and may be able to pursue a guarantor or former tenant or guarantor or draw down on a rent deposit.

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