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The government announced on 10th March 2021 that it would again extend the temporary ban on forfeiture (termination of a lease) for non-payment of rent from 31st March 2021 until 30th June 2021. The extension provides a further 3 months protection for tenants. The extension to the scheme will continue to restrict a landlords right to forfeit the lease on the grounds of non-payment of rent or other sums due under the lease.
Further extensions have also been announced in relation to the restrictions on the use of Commercial Rent Arrears Recovery. (‘CRAR’). From 25th March 2021 but before 23rd June 2021, tenants must be in at least 457 days rent arrears before CRAR can be exercised or subtenants can be forced to pay rent directly to the superior landlord. From 24th June 2021 until 30th June 2021, at least 554 days rent arrears must have accrued before CRAR can be exercised.
Landlords preserve their right to recover rent from former tenants or guarantors by serving a Section 17 Landlord and Tenant (Covenants Act) 1995. The landlord must serve the formal Section 17 notice within 6 months of the charge (to include rent, service charges and other sums) becoming due. Failure to do this will cause the landlord to lose their right to pursue those who retain liability for outstanding sums.
It is not clear if the government intends to extend restrictions on the use of winding up petitions and statutory demands to after the current deadline of 31st March 2021. However, it is anticipated they will extent these deadlines shortly.
The government has however reiterated its intention to review the ‘outdated commercial landlord and tenant legislation, to address concerns the current framework does not reflect the current economic conditions’. The issues to be reviewed include the security of tenure regime under Part II of the Landlord and Tenant Act 1954, different models of rent payment, and how to improve relationships between landlord and tenant to ensure the high street thrives in a post pandemic market.
It should be noted that in June 2020 the Government published their Code of Practice for commercial property relationships during the Covid-19 pandemic. Whilst this is a voluntary code it may highlight some of the current long term thinking of Government.
However, landlords still are in a position where their legal rights continue to be restricted and unless agreement is reached with tenants, arrears will continue to increase as well as interest on those arrears, thereby pushing the issue of debt further down the road.
April 26, 2021
Kirsty is a Solicitor and Partner and Heads the Commercial Property department.