Commercial Rent Arrears Recovery and Winding Up Petitions in times of Coronavirus (COVID-19)



Following our previous note on the future of Winding Up Petitions generally at this time, the Government has now announced it is to introduce legislative measures to protect the UK High Street from aggressive rent collections, including the use of Winding Up Petitions.

Under measures announced by the business secretary and supported by the British Retail Consortium and UK Hospitality, the government is proposing to deploy temporary measures to protect commercial tenants in rent arrears from the existential threat that can be posed by landlords seeking to enforce rent obligations.

In recognition that landlords too have liabilities, the government is encouraging landlords and tenants to work together and for tenants to pay what rent they can afford.  To prevent swift enforcement of rental liabilities that have fallen due the government is planning to temporarily ban the use of statutory demands and winding up petitions where companies cannot pay their bills due to coronavirus.

Further legislation is also due to be passed to prevent landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent. These proposals are in additional to  the prohibition on the exercise of a right of re-entry or forfeiture under a relevant business tenancy for non-payment of rent under section 82(1) of the Coronavirus Act 2020 which is covered in our note on sections 81 and 82.

It appears the plan was for these proposals to apply from 1 March to 30 June, however legislation is yet to be laid and it remains to be seen whether the government will take the unusual step of introducing new rules that apply retrospectively.

The government has suggested that a Winding Up Petition based on an inability to pay debts due will first be reviewed by the court prior to issue, with no petitions to be presented, or orders made where the inability arises as a result of COVID-19.  Clearly, there will be much scope for argument as to whether failings are truly attributable to COVID-19.

If you or a client has an extant Petition pending, are facing one or were considering issuing one; or you are or represent a landlord who was contemplating using Commercial Rent Arrears Recovery, or a tenant facing such proceedings, members of 1 Chancery Lane are available to assist at this uncertain time for business.

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