Covid-19: Government adds further protections for commercial tenants

The Government has announced new measures to protect commercial tenants at risk from being served with a statutory demand or winding up petitions.

In circumstances where a tenant has been unable to pay rent due to a landlord due to Coronavirus, the new measures will ban statutory demands made in the period 1 March 2020 to 30 June 2020 and winding up petitions presented from 27 April 2020 through to 30 June 2020.

These measures do not constitute a blanket ban on all statutory demands and winding up petitions and the court will review any petition to determine the reasons why the company cannot pay its debts. If the reason is due to Coronavirus then the application will not proceed further but if it is for any other reason then the application will proceed past this review. These measures may be extended if the Government extends the moratorium on commercial lease forfeiture past 30 June 2020.

However, the legislation will not ban the issue of a statutory demand or a winding up petition after 30 June 2020, so a landlord may wish to issue a statutory demand or winding up petition on 1 July 2020. If a landlord does want to protect its position in relation to the non-payment of rent, it would have to act sooner rather than later as the longer a landlord leaves a breach of a lease, the more likely that breach will be deemed to have been waived.

The Government has also introduced measures to provide tenants with more time to pay rent by preventing landlords using the Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent – prior to the Coronavirus pandemic, there had to be an amount equal to 7 days rent.

With the Government aiming to safeguard as many jobs as possible during the current pandemic, it is little surprise that the Government has brought forward these additional measures which are designed to protect the high street and jobs in other sectors and in the short term the measures will be beneficial to a tenant. However, the measures do have an expiration date and the usual range of forfeiture and enforcement options (as at the date of this article) will be available to landlords again from 1 July 2020 onwards.

At Bromleys we have the expertise and knowledge to assist you with all manner of commercial property related matters including property litigation. Call our dedicated Corporate and Commercial helpline on 0161 694 4143 for assistance.