Ban on forfeiture of commercial tenancies due to non-payment of rent extended further

The ban on forfeiting commercial tenancies on the ground of non-payment of rent was due to expire on 31 December 2020. It was announced on 9 December 2020 that this is being extended and the ban will continue until 31 March 2021 giving tenants more breathing space and simultaneously increasing the frustration levels of landlords who are having issues with non-paying tenants.

Since this article was written, the moratorium on forfeiting a commercial lease for non-payment of rent has been extended further to 25 March 2022.

The continuing idea for the extensions of the ban is to protect commercial tenants who have been financially affected by COVID-19. It has been labelled as a ‘final’ extension to give tenants a further three months to come to an agreement with their landlord over unpaid rent. We have been told to expect further guidance to support such negotiations in due course.

In addition, the temporary measures restricting the use of statutory demands and winding-up petitions first introduced by the Corporate Insolvency and Governance Act (CIGA 2020) have been further extended. The position currently is that you cannot present a winding-up petition against a company based on a statutory demand that was served between 1 March 2020 and 31 December 2020. Nor can you present a winding-up petition between 1 March 2020 and 31 December 2020 based on the company’s inability to pay its debts unless you have reasonable grounds for believing that COVID-19 has not had a financial effect on the company. These restrictions have now been extended and will expire on 31 March 2021 giving debtors more time to pay or negotiate and, to continue to prevent aggressive rent collections.

In order to recover rent in the meantime there are still options such as issuing proceedings for the debt due, serving a section 17 notice on a former tenant / guarantor, forfeiting for any other breach and using CRAR (in a limited way).The restrictions for using CRAR were already in place when these extensions were announced. In order to exercise CRAR from 25 December 2020, at least 366 days rent must be due before CRAR can be exercised (or before you can request a sub tenant pays rent to the superior landlord instead). Do see our previous note prior to these new extensions on the options for a landlord to recover arrears here.

These announcements are seen by many as just further delaying tactics rather than a fix to the problem. The news of these restrictions was also accompanied by an announcement that there would be a review of the outdated commercial landlord and tenant legislation which will include Part 2 Landlord and Tenant Act. Time will tell if any changes made will assist or indeed if any changes are brought into effect in time to make a difference.

If you are concerned about your situation and would like some further advice about what steps can be taken, then please contact Simon Painter, Partner in our property disputes team or your usual BDB Pitmans contact.