Government Announces Further Extensions to COVID-19 Related Restrictions

Weil, Gotshal & Manges LLP

Yesterday the UK government announced that the existing measures in place to protect commercial tenants from forfeiture, alongside the restrictions on landlords’ abilities to recover rental arrears through the seizure of goods under Commercial Rent Arrears Recovery (CRAR)  will be extended to 25 March 2022.  The total number of days’ outstanding rent required for CRAR will remain at 544 days.

It will also be extending the current COVID-19 related restrictions on statutory demands and winding up petitions, which were due to expire on 30 June 2021, for another 3 months.

Legislation will also be introduced in this parliamentary session to assist commercial tenants and landlords in reaching agreement to deal with the commercial rent arrears built up over the course of the COVID-pandemic.  Further details of the proposed legislation are to be published, as is the government’s response to its call for evidence on commercial tenancies, which received responses from businesses, landlord groups, lenders and investors.  According to the announcement:

  • Landlords will be expected to “make allowances” for “ringfenced” outstanding unpaid rent built up in specific periods where the business had to remain closed during the pandemic and “share the financial impact with their tenants”.  The new measures to be introduced will only cover those businesses impacted by closures.  Therefore rent debt accumulated before March 2020 and after the date when relevant sector restrictions on trading are lifted, will be actionable by landlords as soon as the tenant protection measures are lifted (on 25 March 2022).
  • The legislation will “help tenants and landlords work together to come to an agreement on how to handle the money owed”, which “could be done by waiving some of the total amount or agreeing a longer-term repayment plan”.
  • In cases where an agreement cannot be made, a legally binding arbitration process will be put in place so that both parties can reach a formal agreement. The arbitration process will be delivered by impartial private arbitrators in accordance with guidelines set out in the legislation.
  • In order to ensure landlords are protected, the government is making clear that businesses who are able to pay rent, must do so.

We will have to wait for the draft legislation to be published to see how the new arbitration procedure will interact with tenants’ ability and desire to compromise lease liabilities under CVAs and restructuring plans.

A review of commercial landlord and tenant legislation will be launched later this year and will consider a broad range of issues including the Landlord & Tenant Act 1954 Part II, different models of rent payment, and the impact of Coronavirus on the market.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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