Intro
Looking back, it seems incredible that the coronavirus pandemic had such a significant impact on business. As we bid farewell to masks, social seclusion, and those dreadful stats that are regularly reported in the media, COVID seems like a horrible dream. And to think we somehow managed to carry on and run our enterprises throughout this bleak period.
The moratorium on landlord
The moratorium on landlord remedies to implement CRAR (commercial rent arrears recovery) has ended in England and Wales with effect from March 25, 2022, just over two years after it first went into place.
On March 25, 2022, the moratorium on the forfeiture of a business lease for failure to pay rent also came to an end in England.
The ban on forfeiture in Wales, however, has been extended for an additional six months and will now conclude on September 24, 2022.
Many landlords who have tenants in arrears or need to seize possession of their property will be relieved by this.
If the rent arrears meet the criteria for protected rent arrears, the Commercial Rent (Coronavirus) Act will have an impact on both CRAR and forfeiture because it requires the tenant to fully or partially close under Coronavirus regulations; we go into more detail on this topic later in this article.
What is CRAR?
The Tribunals Courts and Enforcement Act 2007, Part 3 allows the landlord to use CRAR, which was introduced in April 2014, to recover arrears if the rent is not paid by the due date.
A court order is not necessary for CRAR. Only the recovery of rent (and VAT) in wholly commercial premises is permitted. It can’t be used to get back any other fees that are owed, including service fees or insurance.
To use CRAR, a formal rental agreement or lease must be in force, and it cannot have been cancelled.
What is Forfeiture of Lease?
A landlord has the right to forfeit, or end, a lease if he wants to take back control of commercial property before it expires.
The tenant’s failure to pay rent must be the cause of the agreement’s conditions being broken (other breaches require that the landlord give the tenant time to remedy the breach).
Additionally, the lease must have a provision allowing for forfeiture.
A certified enforcement agent must enter the vacant property peacefully once it has been forfeited, typically with the aid of a locksmith.
The tenants’ and any subtenants’ rights to the property will terminate once they have gained entrance, at which point the locks will be replaced.
Commercial Rent (Coronavirus) Act
The Commercial Rent (Coronavirus) Act, new legislation that went into effect on March 24, 2022, will continue to place limitations on some enforcement action while maintaining the CRAR and forfeiture of lease procedures as-is. Here is a link to the government’s press release | https://www.gov.uk/government/news/new-law-to-resolve-remaining-covid-19-commercial-rent-debts-now-in-place
The law addresses CRAR, confiscation, and winding up petitions when it comes to “protected rent arrears.”
The main ideas are summarised below, and you may learn more about the Commercial Rent (Coronavirus) Act in this article.
Protected Rent Arrears
These concern a business tenancy, as that term is used in Part II of the Landlord and Tenant Act of 1954, when the establishment and/or premises were obliged to completely or partially shut down due to coronavirus laws. It makes no difference if some restricted activity, were allowed notwithstanding the requirement to close.
The “relevant period” is defined as the time period starting at or after 2 p.m. on March 21, 2020 and ending at or before 11:55 p.m. on July 18, 2021 (in England), or 6 a.m. on August 7, 2021, whichever comes first (in Wales).
Arbitration
The only course of action available to the landlord and tenant in cases where the arrears meet the requirements for protected rent arrears is to engage in arbitration through a government-approved arbitration agency.
The tenant’s business viability and the landlord’s financial stability shall be the arbitrator’s guiding criteria.
The landlord is forbidden from using these remedies during the period that starts on the day the Act was approved and ends either when arbitration has ended or when the six-month arbitration application period has elapsed.
- Making a debt claim in civil proceedings
- Using the commercial rent arrears recovery power (CRAR) and the protected debt is to be disregarded when calculating the net ]unpaid rent for CRAR
- Give notice of enforcement in relation to the protected debt
- Enforcing a right of re-entry or forfeiture
- Using a tenant’s deposit
Arbitration is, however, not an option should the tenant be subject to:
- A company voluntary arrangement which relates to any protected rent debt that has been approved under section 4 of the Insolvency Act 1986
- An individual voluntary arrangement which relates to any protected rent debt that has been approved under section 258 of that Act
- A compromise or arrangement which relates to any protected rent debt that has been sanctioned under section 899 or 901F of the Companies Act 2006
Summing-up
If you have any queries or would like further information about what steps you might be able to take please contact our business solutions advisors. They will guide you on your next step and help you with an appropriate solution to deal with your property matter.
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