The ongoing Covid-19 pandemic is having a detrimental effect on both commercial landlords and commercial tenants alike. What are the options open to a landlord?

The starting point is to note what a landlord cannot do at present. The Government has introduced various regulations which limit the legal steps which a landlord can take against a tenant for non-payment of rent.

At present, a statutory demand and insolvency proceedings whether bankruptcy or winding up proceedings against a commercial tenant cannot be issued until 1 January 2021.  I fully expect that this date will be extended.

Further, commercial rent arrears recovery whereby a landlord would instruct a High Court Enforcement Officer to attend at the premises and take control of a tenant’s goods is currently unavailable unless the rent arrears amount to 276 days of rent arrears.  This is going to increase to 366 days of rent arrears from 25 December 2020 and once again I would expect this deadline to be further extended by the Government.

Historically one of the options available to a landlord, where a tenant has failed to pay rent under a commercial lease, is to forfeit that Lease and bring it to an end. Current Government regulations means that leases cannot be forfeited until at least 1 January 2021 but I do expect this deadline to be extended.

What then are the options that are left for landlords at this current time?  A landlord is still able to issue debt collection proceedings in the County Court or High Court against their tenants.  Careful consideration must be given before a landlord takes this step as the current Court processes in place are slow and long (due to Covid Court pressures) and even if you obtained a County Court Judgment against your tenant for non-payment of rent there is no guarantee that your tenants would be in a financial position to pay that County Court Judgment.  You simply could end up with a tenant still being in occupation and still not paying rent.

There may be a rent deposit under which a landlord can draw down rent on a temporary basis to at least assist with cash flow for a landlord. It may be that there is a guarantor or a former tenant who could be pursued to pay the current tenant’s rent arrears.

I think the most important aspect at this time is for a landlord to remain in communication with their tenant.  A landlord should be asking a tenant to provide evidence as to the tenant’s financial viability.  The tenant should be asked to provide trading accounts to confirm that their turnover and cash flow has diminished. If the tenant needs time to pay the arrears the landlord may want to consider entering into a payment agreement with the tenant requiring the tenant to pay the arrears in specified instalments.

The advantages of entering into a payment agreement are that it will preserve the landlord and tenant relationship and provide some time for the tenant to resolve any financial issues it may have.  If successful it will also achieve full payment of the arrears.

For further help or advice, please contact Property Litigation Partner, Rob Cooke, on 0114 228 3261 or rob.cooke@luptonfawcett.law

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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