Summary of Landlord’s Remedies During The COVID-19 Pandemic

Summary of Landlord’s Remedies During the COVID-19 Pandemic

Many landlords and tenants are collaborating to find a way through the pandemic with many landlords offering concessions rather than facing the possibility of vacant properties and tenant insolvency. However, where tenants are either defaulting on instalment agreements or refusing to engage with their landlord, the Government measures introduced to assist commercial tenants has significantly reduced the landlord’s remedies.

Below is a general overview of the remedies currently available:

Forfeiture

Barred under Coronavirus Act 2020 until 30 June 2020 (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.

Possession Proceedings

Practice Direction 51Z of the Civil Procedure Rules was introduced on 27 March 2020 staying on all possession proceedings and/or enforcement of possession orders for 90 days until 30 June 2020 (unless extended). This applies to both to private and public sectors and includes licences and mortgage cases.

Commercial Rent Arrears Recovery (previously known as distress)

Remedy still available but the Government is introducing legislation that requires the tenant to owe at least 90 days’ arrears before this remedy can be exercised. The knock on effect is that landlords cannot serve notice on sub-tenants requiring payment of rents to it direct until the principal rent under the Lease is at least 90 days in arrears.

Statutory Demands / Tenant Insolvency

The Government is about to introduce new legislation barring service of statutory demands or issue of winding up petitions until 30 June 2020 (unless extended).

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

Depending upon the terms of the Lease, demands for payment can still be made against Guarantors. They may also be required to take a new lease of the property depending on the terms of the guarantee.

It may also be possible to pursue the original or previous tenant depending upon the date of the Lease. Guarantors under AGAs are also liable subject to the landlord serving on them notice within 6 months on of the debt falling due under s17 of the Landlord and Tenant (Covenants) Act 1995. Proceedings against the Guarantor do not have to be started immediately but the s17 procedure must be followed in order for the landlord’s position to be preserved 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 regard to service of notices and grounds for withdrawal. In the event of tenant insolvency, there is a grey area over the status of the rent deposit.

Please contact Meera Patel for further information.

The contents of this email are intended for general information only and does not constitute legal advice. Wallace LLP cannot accept responsibility for any loss arising from the use of the content in this email. This information was prepared on 6 May 2020.