Current restrictions on commercial landlords recovering rent arrears
Due to the ongoing Covid 19 crisis the government have enforced many restrictions on landlords and the impact on commercial landlords has been particularly severe. The Government has provided no practical protection for landlords from their lenders although they themselves are restricted on what action they could take against their tenants.
So, what can you currently do as a landlord?
Let’s start with the actions you are prohibited from taking.
The Coronavirus Act 2020 prohibited forfeiture proceedings against tenants who had not paid rent and re-entry by peaceful means where tenants had not paid any rent. This will remain in force until the 31 December 2020. The prohibition on the issuing of statutory demands and winding up petitions will remain in place until the 31 December 2020. However, proceedings can be allowed if the landlord can show the tenant has not been adversely affected in their ability to pay the due rent. Commercial rent recovery by bailiffs entering a property to forfeit goods to pay for the debt will only be possible if the rent arrears are to the amount of 276 days rent. This will be further extended on the 25 December to 355 days rent arrears before any notice is served.
Landlords can still undertake the following actions
Landlords are still permitted to draw money from the tenants rent deposit. This can be used to fulfil the entire rent arrears or part of the arrears. This will bring some relief to struggling landlords. It is be still possible to issue legal proceedings for non-payment of rent, however landlords should be aware that the Courts have been greatly affected by Covid 19 and are currently dealing with a large back log of cases. There is also the risk that the tenant may become insolvent during the litigation process. Landlords should assess this costs and risk very carefully before commencing any legal claim.
Landlords may enforce judgements already obtained. This can be done by way of enforcement using Court Enforcement Officers who may seize goods, enforce third party debt control orders and charging orders against the tenant’s property. Actions against guarantors and ex tenants is still permitted using the usual litigation proceedings and enforcement methods. It is also still possible to for landlords to sue subtenants under the Tribunal, Courts and Enforcement Act 2007. The Act places an obligation on the subtenant to pay the rent directly to the landlord when the main tenant is in rent arrears. However, please note this can only take place if the rent recovery by bailiffs entering a property to forfeit goods to pay for the rent arrears are to the amount of 276 days rent. This will be further extended on the 25 December to 355 days rent arrears before any notice is served.
Readers should reassess the situation on the 31st December to check what the Governments position on these matters is at that date. It is uncertain if the measures will remain in force at that date or if they will be further amended.
Rajesh Laxman
