On 16 June 2021 the government announced its intention to extend the restrictions put in place to protect commercial tenants until 25 March 2022

This latest announcement comes as a massive disappointment to commercial landlords across the country as it was expected that no further extensions would be granted. Commercial landlords were first prohibited from forfeiting their tenants’ leases on the grounds of unpaid rent arrears in March 2020. Since then the prohibition has been extended to 30 September 2020, 31 December 2020, 31 March 2021, 30 June 2021 and now until 25 March 2022. This latest extension comes as a huge blow to commercial landlords who may have tenants in vast arrears of rent but cannot forfeit the lease as a form of recovery. Unlike the previous extensions which were only for 3 months, this one is for 9 months.

Commercial Rent Arrears Recovery

An alternative method of recovering rent arrears can be done through a procedure known as the Commercial Rent Arrears Recovery, otherwise known as “CRAR”. CRAR allows a landlord to instruct an Enforcement Agent to take control of a tenant’s goods and sell them in order to recover an amount equivalent in value to the rent arrears. However, due to the Coronavirus pandemic, restrictions came into force which meant that this route of rent recovery could only be exercised if there was net unpaid rent of an amount equal to 457 days of unpaid rent between 25 March and 23 June 2021 and 554 days of unpaid rent between 24 and 30 June 2021.

The latest government announcement has also extended the restrictions on using this method of rent recovery until 25 March 2022. The minimum total amount of net unpaid rent to use this procedure remains the same at 554 days’ worth which is circa 6 quarters’ rent.

Alternative Options of Recovering Rent Arrears

Although commercial landlords cannot use the forfeiture procedure and there are limitations on using CRAR, there are still options available which include;

  • Pursuing debt recovery proceedings against a tenant in the civil courts;
  • Forfeiture for breaches of covenant other than non-payment of rent;
  • Pursuing any guarantor or former tenant who is liable under the terms of the lease; and
  • Drawing funds out of any rent deposit that may exist.

Please note that the suitability of these remedies is dependent on the specific circumstances of each case.

Whilst many commercial landlords were holding out to see whether the forfeiture and CRAR restrictions would finally end this month, the government’s recent announcement will no doubt mean that many commercial landlords are now having to re-consider their position. It now may no longer be an option for commercial landlords to hold out until next March to see if the restrictions are removed and that they now have no option but to take proactive steps to recover outstanding rent arrears.

Code of Practice

In June 2020 the Government introduced a voluntary Code of Practice with suggestions as to how to approach the current situation where a tenant may have outstanding arrears. In the government’s announcement on 16 June 2021 it was indicated that a new Act of Parliament will be introduced to deal with accrued rent arrears that have built up during the Coronavirus pandemic. The specifics of the Act are yet to be revealed but the general intention is that the Act will ring-fence outstanding unpaid rent and guide tenants and landlords to agree repayment plans.

For more information and guidance on your rights and options as a commercial landlord, please contact Natasha Wright on 0113 280 2227, Claire Moss on 0113 280 2089 or Hayden Glynn on 0113 280 2032 to find out how we can assist you.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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