COVID-19 and Commercial Property: protection for commercial tenants

In our last update (COVID-19 and Commercial Property: protections under the Coronavirus Bill), we highlighted the provisions the Government had enacted to protect businesses faced with the coronavirus pandemic. Within that note, we outlined how commercial tenants still faced uncertainty as no protection was offered to restrict insolvency action, nor CRAR (commercial rent arrears recovery) action, taken by commercial landlords against tenants.

Both these gaps will soon be addressed by the Government, which will introduce new measures under the Corporate Insolvency and Governance Bill 2020 to restrict the use of statutory demands, winding-up petitions, and orders if the debtor is only unable to pay its debts because of the outbreak of COVID-19. Exactly how the insolvency protection will operate, and importantly how it will distinguish between a “normal” insolvency situation and the situation the legislation will prevent (insolvency for debts arising because of the outbreak of COVID-19) is not clear. The protection will initially affect all statutory demands issued between 1 March 2020 and 30 June 2020, and all winding up petitions presented from now until 30 June 2020 will be reviewed on issue by the Court (and it may be the restrictions will apply to non-landlord creditors also).

Under CRAR, the Government will prevent commercial landlords from exercising these tools against tenants unless rent arrears are unpaid for at least 90 days.

It is clear these measures will not affect a tenant’s liability for rent- they only restrict the actions a landlord can take to enforce for default at this specific time. The Government continues to urge landlords and tenants to work together, and tenants are urged to pay rent if they can afford to. All these protections are designed to give breathing space, not immunity.

There remain options available to landlords to enforce against commercial tenants failing to pay arrears, and it is clear these protections do not affect the enforcement of breaches not related to non-payment of sums due under a lease.

If you need to explore these issues in further detail, please contact Nigel Maguire on nigel.maguire@ashtonslegal.co.uk or call 07984 401319.