Extension of the Moratorium on Forfeiture of Commercial Leases and Rent Arrears Recovery

Extension of the Moratorium on Forfeiture of Commercial Leases and Rent Arrears Recovery

In March 2020, the government placed a moratorium on forfeiture proceedings for commercial leases until 30 June, where the landlord was forfeiting the lease for non-payment of rent. There is now a ‘final’ Extension of the Moratorium on Forfeiture of Commercial Leases and Rent Arrears Recovery.

Commercial Rent Arrears Recovery (CRAR) rights are usually exercisable when there are at least 7 days’ worth of rent arrears. 

The government amended this in April 2020 to require 90 days’ worth of rent arrears and in June 2020 this was amended further to require 189 days’ rent arrears.

Further amendments have been made to require at least 276 days’ arrears from 29 September 2020, and 366 days’ arrears from 25 December 2020 before a landlord can enforce the right to forfeit the lease. This was to apply until 31 December 2020 but has now been extended further.

The Government has announced a ‘final’ Extension of the Moratorium on Forfeiture of Commercial Leases and Rent Arrears Recovery, where the landlord was forfeiting the lease for non-payment of rent. The moratorium has now been extended until 31 March 2021.

The restriction on commercial landlords using Commercial Rent Arrears Recovery (CRAR) to recover unpaid rent has also been extended to 31 March 2021 to coincide with the moratorium’s expiry date.

A landlord’s ability to serve statutory demands and winding-up petitions as a means of recovering rent arrears, is also currently restricted and this restriction has been extended to the 31 March 2021.

The Government has also announced a review of commercial landlord and tenant legislation in early 2021 to ensure that the legislative framework reflects the current economic conditions.

Forfeiture of commercial leases – Section 82 Coronavirus Act 2020 prevents any forfeiture between 26 March 2020 and 31 March 2021, whether by proceedings or peaceable re-entry, of the vast majority of commercial leases for non-payment of any sums due under the lease .

Commercial Rent Arrears Recovery (CRAR) – The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 prevented landlords from using CRAR unless an amount of at least 90 days’ rent was due (it had previously been seven days or more). This amount was subsequently increased and is currently at least 276 days’ rent, but will increase again to 366 days’ rent from 25 December. This restriction also now applies until 31 March 2021. These amendments are made under the Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020 (SI 2020/1002)

Statutory demands and winding-up – The Corporate Insolvency and Governance Act 2020 prohibits the presentation of a winding-up petition based on an unsatisfied statutory demand served between 1 March 2020 and 31 March 2021. It is also not possible under the Act to present a winding up petition between 27 April 2020 and 31 March 2021, unless it can be shown that coronavirus has not worsened the debtor’s financial position or the debtor could not have paid its debts even if there had been no such worsening of its financial position.

Our previous article on the governments temporary Code of Practice with the aim of encouraging fair and transparent discussions between commercial landlords and tenants during the COVID-19 crisis can be read here. Each relationship will need to respond to these circumstances differently. Therefore, this code is voluntary and presents options for how to agree new payment arrangements. The relationship between landlord and tenant is defined by law (and by contract in Scotland), and parties may wish to seek legal advice when agreeing payment arrangements.