Yesterday (23 April 2020) the government announced plans to protect business tenants from what it calls "aggressive rent collection". New measures will be introduced to temporarily ban the threat of insolvency proceedings by a landlord where a tenant is unable to pay rent because of the impact of COVID-19.
The Coronavirus Act 2020 which was passed on 25 March 2020 has restricted a landlord's ability to forfeit a business tenancy for non-payment of rent for at least 3 months until the 30 June 2020. However, the statutory moratorium did not extend to insolvency proceedings, which allowed some landlords to exert pressure on tenants by threatening them with a winding up petition unless they paid their arrears. Currently, a winding up petition can be presented if the company has debts of £750 or more. The new measures are to be included in the Corporate Insolvency and Governance Bill and will require any winding up petition against a company to first be reviewed by the court to determine the reasons for the company's inability to pay the debt. If the company's inability to pay is due to the impact of COVID-19 then the petition cannot be presented or a winding up order made. These measures will be in force until 30 June 2020 and may be extended, similar to the restrictions on forfeiture.
The government has also announced that it intends to introduce secondary legislation to prevent landlords from being able to use the Commercial Rent Arrears Recovery (CRAR) procedure unless rent is unpaid for over 90 days. The CRAR procedure allows landlords to take control of the tenant's goods and to sell them to off-set any arrears.
Both measures will effectively limit the remedies available to landlords to recover unpaid rent during the current pandemic leaving landlord's with very few options such as drawing down on rent deposits, issuing court proceedings or by pursuing guarantors or former tenants. Many landlords have already seen a fall in rental income from the March quarter and these measures are likely to see an even bigger impact at the June quarter day.
High street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic.