The Government has just announced that the moratorium on commercial forfeiture has been extended until the end of March 2021. Commercial landlords will now be unable to evict business tenants who are not paying their rent until at least April 2021. This means landlords will not have been able to evict defaulting business tenants for a year.
No forfeiture for non-payment of rent
The moratorium, was first enacted by section 82 of the Coronavirus Act 2020 on 26 March 2020. After the latest extension, this moratorium was due to end on 31 December 2020. Rt Hon Robert Jenrick MP, the Secretary of State for Housing, has now announced that the moratorium will be extended by a further three months, until the end of March 2021. Commercial landlords are now unable to take steps to forfeit a lease by peaceable re-entry or court proceedings for non-payment of rent until 1 April 2021.
The extension will be a lifeline for commercial tenants who are struggling to pay their rent in light of the latest lockdown and tiered restrictions. Robert Jenrick has now commented that for business tenants the moratorium “will help them recover from the impact of the pandemic and plan for the future.”
Nevertheless, the announcement will come as a further blow to commercial landlords, who may well have received no rental income for a year by the end of March 2021. It is small consolation for some hard pressed landlords that section 82 protects landlords from accidentally waiving their right to forfeit the lease during this time.
In addition, amendments to the Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020 mean that landlords are also prevented from using commercial rent arrears recovery (CRAR) to collect rent. From 25 December 2020, there will have to be 366 days of rent outstanding before a landlord can proceed with a CRAR process.
No Statutory Demands or Winding Up Petitions
The blanket restriction on presenting Statutory Demands and Winding Up Petitions has also been extended to 31 March 2021 under amendments of paragraphs 1 and 21 of Schedule 10 of the Corporate Insolvency and Governance Act 2020. This means there is little point in serving a statutory demand on a debtor until April 2021.
No personal liability for directors for wrongful trading
On 25 November 2020 the Government announced that it had removed the threat of personal liability for directors from wrongful trading until 30 April 2021.
However, under the Finance Act 2020 the Government has brought in other wide-ranging measures to pursue directors of companies direct to recover lost taxes, including for potential furlough fraud and where there have been repeated insolvencies or past failures of businesses. Directors also need to take care if continuing to discharge some liabilities in preference to other undisputed liabilities, such as rent.
Overall, the message from the Government is still to encourage co-operation rather than litigation, as landlords and tenants are urged by the Secretary of State for Housing to “reach agreements on rent wherever possible and enable viable businesses to continue to operate” during a time in which he acknowledges we are witnessing a “profound adjustment in commercial property”.
It has also been announced that a review of commercial landlord and tenant legislation will be launched in early 2021. This will include consideration of Part II of the Landlord and Tenant Act 1954, different models of rent payment and the impact of Covid-19 on the market.
If you have any concerns about anything raised within this update and would like to speak to one of our experts, please contact Joanna Osborne, Emma Gregory or any member of the Property Litigation team. Ali Zaidi and David Fendt are also available for support in relation to the Finance Act 2020 and its impact on directors duties, as well as insolvency issues.
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