United Kingdom: COVID-19 - Government extends forfeiture moratorium and rent recovery restrictions to 31 December 2020

In brief

The UK government has announced the following extension of COVID-19 protections for commercial tenants:

  • The current forfeiture moratorium for non-payment of rent is extended until 31 December 2020.
  • The limitations on use of Commercial Rent Arrears Recovery (CRAR) are also extended to 31 December 2020.
  • The restrictions on service of statutory demands and winding-up petitions imposed by the Corporate Insolvency and Governance Act 2020 (CIGA) are currently in place until 30 September, and the government is considering a similar extension to this deadline.

Key takeaways

  • Rents will continue to accrue, as will interest on arrears (where chargeable under the lease).
  • CRAR action will now require 276 days' outstanding rent (rising to 366 days for enforcement notices given after 24 December).
  • Assuming a government extension of the CIGA rent recovery restrictions, Landlords' remedies for pursuit of rent arrears will, until 31 December, rely on claims against former tenants or existing guarantors, drawdown of existing rent deposits, and debt proceedings brought through county courts or the High Court.

Contents

In more detail

2020 has been a year of struggles in the commercial rental market - both for landlords to collect rents, and for tenants to earn sufficient revenue to satisfy their rent obligations.

The extension of commercial tenant protections introduced earlier this year in response to the COVID-19 crisis is extremely welcome news for tenants who were concerned at the prospect of imminent action for unpaid arrears. Our last client alert warned lease parties that the end of the road for such protection was in sight. In fact, that road has now been lengthened.

The expiry date of the moratorium on  forfeiture for non-payment of rent introduced by the Cornavirus Act 2020 (see our previous alert here) rolls forward to 31 December without amendment in the scope or terms of that Act. Rent, insurance, service charge and interest will continue to accrue, but landlords will need to wait out another payment quarter before employing forfeiture action as a means of reclaiming and remarketing premises.

Similarly, with effect from 29 September, the restrictions on the use of Commercial Rent Arrears Recovery have been extended, so that the number of days' rent that must be outstanding before CRAR can be instigated is:

  • 276 days’ rent where the notice of enforcement is given on or before 24th December 2020; rising to
  • 366 days’ rent where the notice of enforcement is given on or after 25th December 2020.

A similar extension to the 30 September deadline for the rent recovery restrictions introduced by the Corporate Insolvency and Governance Act 2020 is anticipated but not yet confirmed.

This latest deadline extension may necessitate both the review of existing concessionary arrangements, which were agreed on the basis of a now superseded deadline, and the negotiation of new rent payment plans to bridge the gap. The government continues to encourage landlords and tenants to collaborate in good faith with regard to rent payments and arrears in accordance with the voluntary Code of Practice introduced earlier this year.

For further information and to discuss what these measures might mean for you, please get in touch with your usual Baker McKenzie contact.


Copyright © 2022 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.