Lawbite: Further protection for tenants and debtors affected by Coronavirus

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate litigation - LawBite

23-06-2020

Government Press Release and Code of Practice published on 19^th June

As we wait for the Corporate Insolvency and Governance Bill to conclude its stages through the House of Lords the Government has put in hand further measures to protect viable businesses.

At the close of last week the Government issued a press release confirming that it proposed to extend the measures currently in place to protect tenants and debtors during this difficult time.  The main points of notes were:

1)   That the Coronavirus Act 2020 was to be amended to extend the time period for suspension of forfeiture for non-payment of “rent” from 30 June to 30 September.  The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2020 come into force on 29th June 2020 and the Business Tenancies (Extension of Protection from Forfeiture etc.) (Wales) (Coronavirus) Regulations 2020 comes into force on 30 June 2020.  The Practice Direction staying possession proceedings more generally (PD51Z) will come to an end on 25 June but will effectively be extended until 23 August by way of a temporary amendment to Rule 55 of the Civil Procedure Rules with effect from 25 June 2020.

2)   That further secondary legislation was intended to prevent landlords using Commercial Rent Arrears Recovery unless they are owed 189 days (rather than 90 days as in the Regulations laid in April of this year) of unpaid rent. The time period for which this measure is in force will be extended from June 30 to September 30 – The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (No. 2) (Coronavirus) Regulations 2020 comes into force on 24 June 2020.

3)   That an amendment to the Corporate Insolvency and Governance Bill has been tabled which would see the temporary ban on the use of statutory demands and winding-up petitions where a company cannot pay its bills due to COVID-19 extended from the current proposed deadline of 30 June (or 1 month after the Act comes into force) to 30 September. 

On the same day that the press release was issued the Government published a voluntary code of practice to encourage commercial tenants and landlords to work together to protect viable businesses impacted by the pandemic.  It relates to all commercial leases in all sectors and applies across the UK. 

The code recognises that tenants (and landlords and guarantors) are legally obliged to comply with their obligations in leases, including the payment of rent.  However, it anticipates that those whose businesses are affected by the pandemic may need to negotiate alternative/ supplemental arrangements, for example rental concessions.  As such it sets out some key principles to apply when approaching such negotiations, including the need for transparency and collaborations and the need to act reasonably and responsibly.

Key points

• These changes come as the June quarter day fast approaches and landlords and tenants are naturally considering their options
• With many of the more common enforcement options temporarily unavailable for landlords we may find more debt recovery actions being commenced in the courts.  Tenants who can pay but who are relying on the measures in place to offer them protection may well pay to avoid proceedings and an unfavourable order.  Landlords will, however, be conscious of the court fees/ costs of taking such action, the time to secure judgment and of course the uncertainty of enforcing any judgment 
• Whilst the changes are obviously intended to offer eviction and enforcement protection to commercial tenants, it remains to be seen whether the protections have the effect of lessening the profile and rate of retail insolvencies seen in recent days.