As many landlords of commercial premises will have been well aware, over the last few years (since March 2020) the ability to take action against a tenant for failure to pay rent has been significantly restricted. As of 25 March 2022 however much of those restrictions have ceased and (in most cases) outstanding rent arrears can now be pursued in the usual ways.
In this note, we summarise the current options for pursuing a tenant for outstanding rent arrears.
On 25 March 2022 the Commercial Rent (Coronavirus) Act 2022 (“CRCA”) was enacted. CRCA creates a new power for tenants who were obligated to close during lockdown to be granted relief from the payment of specific arrears of rent accrued during specific periods where they were unable to trade due to a lockdown effecting their business sector.
To determine what arrears the tenant should be granted relief from, the CRCA creates an arbitration process by which an arbitrator will determine how the specific arrears of rent accrued during the specific periods of lockdown will be settled. The arbitrators’ powers will be wide-ranging and they will be able to consider the entire circumstances including the parties’ solvency in reaching a decision.
The arbitration process is available (subject to any amendments to the CRCA) for 6 months from 25 March 2022 (but could be extended by the Government) and only applies to specific arrears accrued during the specified period defined for each business sector between 21 March 2020 and 18 July 2021. The dates below show the periods for each sector. For example:
- a garden centre would be able to refer arrears accrued between 21 March 2020 and 13 May 2020 to arbitration.
- A bar or restaurant would be able to refer arrears accrued between 21 March 2020 and 18 July 2021 to arbitration.
|Business sector||Relevant end date (England)||Relevant end date (Wales)|
|Hospitality & Nightclubs||18 July 2021||07 August 2021|
|Non-essential Retail||12 April 2021||07 August 2021|
|Garden Centres||13 May 2020||22 March 2021|
|Personal Care||18 July 2021||12 April 2021|
|Hairdressers||18 July 2021||15 March 2021|
|Hotels & B&Bs||18 July 2021||17 May 2021|
|Self-contained Tourist Accommodation||12 April 2021||27 March 2021|
|Indoor Leisure||18 July 2021||3 May 2021|
|Outdoor Sports/Leisure||29 March 2021||26 April 2021|
|Theatres & Cinemas||18 July 2021||17 May 2021|
|Large Events Venues||18 July 2021||7 August 2021|
If any arrears fall into the above periods, until after the end of the periods described, all action to enforce / recover those arrears using the below enforcement options is suspended. It will not be possible to take action in respect of those specified arrears until the end of the 6 month timeframe for the arrears to be referred to arbitration.
Subject to the CRCA protections and the provisions of the lease, if the tenant falls into arrears of rent, a landlord can peaceably re-enter the premises, i.e. change the locks. This will forfeit and terminate the lease at the time the locks are changed. Prior to taking any such action however landlords should consider whether the right to forfeit has arisen and if it has been waived. Also worth noting prior to forfeiting a lease is the tenant’s ability to seek relief from forfeiture.
Commercial Rent Arrears Recovery (“CRAR”)
Subject to the CRCA protections, CRAR allows a landlord to instruct an agent to attend the tenant’s premises and remove and sell goods belonging to the tenant to the value of the arrears.
Statutory demand and insolvency / bankruptcy action
Subject to the CRCA protections, landlords could serve a statutory demand for payment of arrears. Statutory demands are a relatively quick and inexpensive means of demanding a debt from a tenant and are often used as a precursor to bankruptcy or insolvency proceedings.
Subject again to the CRCA protections, if the tenant does not comply with the statutory demand, bankruptcy or insolvency procedures could be pursued.
Subject to the CRCA protections, landlords can seek to recover arrears by Court proceedings. The first stage would be to issue a letter before action to the tenant describing the arrears, how they accrued and the sums sought. If payment is not forthcoming, Court proceedings for the debt could be issued to seek a money judgment for the arrears.
If a deposit is held, subject to the terms of that deposit, it can be used to settle arrears. Although please note that the CRCA restricts the use of a deposit to settle arrears which fall into the CRCA protections.
Landlords can seek to recover arrears from any third parties who have guaranteed the tenant’s liabilities.
How Moore Barlow can help
To discuss this article or if you are a landlord or tenant requiring assistance with the resolution of a dispute concerning rent arrears please contact our expert team today.