Landlord's Remedies During the COVID-19 Pandemic - June 2021 Update

Despite assurances that there would be no further extensions to the current moratoriums, the government has announced further extensions relating to forfeiture for non-payment of rent and the service of statutory demands and winding up petitions. The remedies available to Landlords against non-payment of arrears remain limited at the current time to provide tenants with further breathing space to kick start their businesses and protect jobs.

The government has also announced its intention to introduce legislation to ringfence rent arrears accrued during the lockdown when a business has had to close because of the pandemic. Landlords will be expected to make allowances for the ringfenced arrears and share the financial impact with their tenants. However, the government has reiterated that this should not be taken as an opportunity for tenants to avoid paying rent. Tenants who can pay should do so. Where agreement cannot be reached, a binding arbitration process will be introduced to enable landlords and tenants to reach a legally binding agreement which both parties must adhere to.

A summary of the available remedies and the current position is set out below.

Forfeiture
Barred under Coronavirus Act 2020 until 25 March 2022 (unless extended) for non-payment of rent or other sums due under the Lease. Peaceable re-entry remains an option for non-money related breaches subject to prior service of a Notice pursuant to section 146 of the Law of Property Act 1925, but could cause reputational issues if utilised.
CRAR (previously known as distress)
Remedy still available but the Government has introduced legislation that requires the tenant to owe at least 544 days’ arrears before this remedy can be exercised. The restrictions on the use of CRAR apply during the “Relevant Period” which has been extended to 25 March 2022.
Statutory Demands / Tenant Insolvency
The Government has extended legislation preventing the service of winding up petitions where the reason for non-payment is Covid-19 until 30 September 2021. Any statutory demands served between 1 March 2020 and 30 September 2021 cannot be relied upon to support a winding up petition issued after 30 September 2021.
Court Claim
Remedy still available for recovery of rent arrears or damages for breaches of the Lease. However, the Court is prioritising urgent applications and there will be long delays before any proceedings are determined. There may also be practical difficulties in enforcing judgments whilst current restrictions remain in place.
Claims against Guarantors, Original / Previous Tenants and Sub-Tenants
Depending upon terms of the Lease, immediate demands for payment can be made against Guarantors as if they were tenant under the Lease. They can also be called upon to step in to the tenancy subject to Lease.
It may also be possible to pursue the original or previous tenant depending upon the date of the Lease. Guarantors under AGA’s are also liable but there is a strict deadline of 6 months of the debt falling due for the Landlord to serve prior notice pursuant to s17 of the Landlord and Tenant (Covenants) Act 1995. Proceedings against the Guarantor do not have to be started immediately but the section 17 procedure must be followed in order to preserve the Landlord’s position in the meantime.
Rent Deposits
The Landlord retains the right to claim under a rent deposit provided strict compliance with the terms of the rent deposit deed particularly with regards to service of notices and grounds for withdrawal. There is a grey area over whether in the event of tenant insolvency a rent deposit falls back into the insolvency pot.

If you would like further advice, please contact Meera Patel or Rhiannon Saunders

The information in this article was prepared on 23 June 2021. The law and practice is currently changing frequently, so please check the up to date position before acting on anything you read here.