COVID-19: Landlord Options for Rent Recovery

During the pandemic, the UK Government has introduced a range of legislation with provisions to protect tenants, meaning that many options normally available to landlords for recovery of rent have mostly been frozen or diluted; this begs the question – what options do landlords have left to recover unpaid rent?

What is the key legislation and what does it mean?

• Coronavirus Act 2020

No business will be forced out of their premises until 30 June 2020 (this date is likely to be extended) for non-payment of rent. Rent is defined under the Bill as any sum payable under the business tenancy including insurance, service charges and interest.

Any failure to pay rent during the relevant period will be disregarded for the purposes of Article 12(1)(b) of the Business Tenancies (Northern Ireland) Order 1996. This means that at the end of the term of the lease, a landlord shall not be able to oppose the grant of a new lease, on the ground that the Tenant did not pay rent during the relevant period.

• Corporate Insolvency and Governance Bill 2020

On 23 April 2020, the government proposed a temporary halt to the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions (from 27 April 2020) – but this is only relevant where the company was unable to pay its bills because of coronavirus. The Bill includes temporary provisions to this affect, and MPs will next consider all stages of the Bill on Wednesday 3 June 2020.

So what options are left to Landlords?

With the introduction of the above legislation, the UK government has shown that it will go to great lengths to protect as many businesses as possible. While landlords are encouraged to allow for a more flexible period in relation to rent payment, landlords are not obliged to agree to rent concessions. The Coronavirus Act does not suspend the right to rent or other payments, only the right to forfeit the lease for non-payment until the moratorium ends, and there are still a number of avenues available to landlords, such as:

• Consider if the tenant’s financial difficulty is due to reasons other than Coronavirus; it may be appropriate to present a winding up petition;
• Charge interest on arrears at the rate specified in the lease;
• Have recourse to parent companies or other guarantors during debt recovery proceedings while the moratorium applies;
• Check insurance policies;
• Draw down on rent deposits.

If you are a commercial landlord and are struggling to make sense of what your options are, or the best course of action to take throughout the pandemic when dealing with rent payment issues, please get in touch with our Commercial Real Estate team; we will be able to discuss and explain your options to you to provide some much needed clarity throughout this uncertain period.

This article has been produced for general information purposes and further advice should be sought from a professional adviser. 

---