Can I recover rent arrears from commercial tenants post-Covid?

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Section 82 of the Coronavirus Act 2020 has impacted landlords and commercial tenants by restricting the landlord’s ability to forfeit a lease during the relevant period. This blog article covers how landlords can recover rent arrears from commercial tenants post-Covid.  

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Serving Notice 

Section 82 of the Coronavirus Act 2020 (‘CVA 2020’) offers protections for commercial leases, this includes restricting the landlord’s ability to terminate a lease during the relevant period. The relevant period began on 26 March 2020 and was due to end on 30 June 2020, but regulations have been made which have extended this period further, most recently to 30 June 2021 (‘Relevant Period’). During the Relevant Period, the right of re-entry or forfeiture for non-payment of rent may not be enforced, by action or otherwise.

There is no requirement that the tenant’s failure to pay the sums due must be as a result of COVID-19. Where the landlord has issued proceedings for forfeiture of the lease before 20 September 2020, those proceedings, and any proceedings to enforce an order for possession, will, however, have been suspended by the courts. 

Changes Post-Covid 

On 25 April 2020, The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 (SI 2020/451) increased the minimum net unpaid rent that must be outstanding before commercial rent arrears recovery (CRAR) may take place to an amount equivalent to 90 days’ rent, while protections from forfeiture under section 82 of the CVA 2020 remained.

New regulations have been introduced since which have increased the minimum net unpaid rent that must be outstanding before CRAR may take place to protect the business tenancies. For instance, the minimum net unpaid rent that must be outstanding before CRAR may take place is 457 days rent between 25 March and 23 June 2021, and 554 days between 24 June and 30 June 2021. The restrictions on the use of CRAR will only apply during the Relevant Period under section 82 of the CVA 2020.

Therefore, the extension of the Relevant Period under section 82 of the CVA 2020 until 30 June 2021 has automatically extended the restrictions on the use of CRAR until that same date. It appears that the increase in the minimum amount of net unpaid rent may also apply to a superior landlord’s right to recover rent from an undertenant under section 81 of the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007).

Claiming rent arrears 

There are currently no restrictions on landlords issuing claims under Summary Judgement in either County Courts or the High Court to recover arrears of rent from tenants. The existence of a prohibition on set-off, deduction or counterclaim will often mean there is no real prospect of a tenant successfully defending a claim, particularly a claim for principal rent.

Where does Legal Utopia fit? 

Legal Utopia provide businesses with support on a range of common legal issues and disputes via its Legal Checker service on a fixed subscription basis on the Legal Utopia app, providing further legal guidance and resources to navigate the process of possession or rent arrears proceedings in residential and commercial premises. 

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