Shops and SMEs to be protected against aggressive rent collection

Stephanie Johnson Associate Solicitor provides an update.

Shops and small businesses will be protected from aggressive rent collection during the Covid-19 emergency.

Instead, Business Secretary Alok Sharma says they will be asked to pay what they can over the next two months.

Mr Sharma says most landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics.

To stop these unfair practices, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. This will help ensure these companies do not fall into deeper financial strain.

The measures will be included in the Corporate Insolvency and Governance Bill, which the Business Secretary Alok Sharma set out earlier this month.

The government is also laying secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

However, while landlords are urged to give their tenants the breathing space needed, the government calls on tenants to pay rent where they can afford it or what they can in recognition of the strains felt by commercial landlords too.

Business Secretary, Alok Sharma, said: “In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.

“Our unprecedented package of support can help commercial landlords, including through the recent expansion of the Coronavirus Business Interruption Loans Scheme.”

Under the measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19.

The new legislation to protect tenants will be in force until 30 June and can be extended in line with the moratorium on commercial lease forfeiture.

The Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulatory Authority have also issued a joint statement encouraging investors and lenders to take into account the issues arising directly from the COVID-19 pandemic in responding to potential breaches of covenants.

Emergency legislation already introduced by government includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties until 30 June.

If you would like more information about the issues raised in this article or any aspect of commercial property law please contact Stephanie on 01228 516666.