Commercial Rent Arrears

The Coronavirus Act 2020 (“the Act”) has put a temporary hold on landlords being able to evict their tenants from both residential and commercial properties, but what else can be done when a tenant owes rent?

Commercial Rent Arrears Recovery (“CRAR”)

CRAR is a procedure for recovering rent arrears under commercial leases but cannot be used for residential leases.

Once the required notice has been served, the landlord will be permitted to seize certain goods to the value of the debt owed. Before Covid-19, a landlord would have generally been able to use CRAR when rent was outstanding for at least 7 days. However, following the implementation of the Act, CRAR may only be used when an excess of 90 days’ rent is due provided that the tenant has not made a partial payment towards the sum owed.

We would recommend that specific advice is obtained to ensure that a landlord has met the specific requirements to use CRAR to ensure that the same was lawful.

Statutory Demands

A statutory demand is a formal request requiring a debt, such as rent arrears, to be repaid within 21 days, failing which a landlord can proceed with insolvency proceedings, to include issuing a bankruptcy petition against an individual or a winding-up petition against a limited company.

However, where the tenant is a company, a landlord will be unable to present a winding-up petition against a based on a statutory demand served between 1 March 2020 and 30 June 2020, unless the landlord can demonstrate that there are reasonable grounds to believe that Covid-19 has not had a financial effect or that the debt would have arisen anyway.

An ill-served statutory demand can be met with an application to set the same aside or an injunction with cost consequences for an unsuccessful party therefore advice should be obtained beforehand.

Issue a Money Claim

A landlord can issue proceedings against the tenant for the rent owed. Subject to the tenant’s status, there are certain pre-action steps that need to be taken.

To summarise, whilst Covid-19 has restricted a landlord’s ability to seek recovery of unpaid rent, there are options and Bromleys can help you determine the best way to proceed

How we can help

Contact our experts on our dedicated helpline 0161 694 4143 for guidance and assistance.