Further changes to landlords’ remedies for recovering commercial rent arrears: An update
Two of the classic self-help remedies open to landlords for recovering commercial rent arrears have traditionally been forfeiture and Commercial Rent Arrears Recovery (CRAR), but both of these have been restricted as a result of Government measures to support tenants during the coronavirus crisis. There is also a proposed ban on winding-up petitions for coronavirus-related debts, which is already being applied by the courts.
Amended CRAR Regulations
The Regulations changing the use of CRAR originally came into force on 24 April and apply to enforcement action taken under that process.
The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 provided three key changes (although only the first is really headline grabbing):
- An increase of the threshold before CRAR can be exercised in the first place – from 7 days’ rent arrears to 90 days, for enforcement notices given between 25 April and 30 June 2020;
- An extension, in certain circumstances, to the date by which an enforcement agent must have taken control of goods if the notice of enforcement is not to lapse; and
- An extension of the 2 year enforcement certificate that enforcement agents must hold in order to act in that capacity (again, in certain circumstances).
However, there were further amendments which applied from the June quarter day (being the day on which the amendments are expected to take effect). The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (No. 2) Regulations 2020 provided:-
- The threshold before CRAR can be exercised was increased from 90 days to 189 days’ rent arrears for enforcement notices given between 24 June and 30 September 2020;
- The restrictions on taking control of goods at premises which include a dwelling-house and goods which are found on the highway (and on the premises which an enforcement agent may not enter, re-enter or remain) were extended both in their remit and time period (such that those restrictions did not expire until 23 August 2020); and
- There was a further extension to the validity period of the enforcement certificate that enforcement agents must hold.
The position was then amended again in time for the September quarter day.
Accordingly, before a landlord could exercise CRAR, the rent arrears had to be a minimum of 276 days’ rent (for notices served between 29 September 2020 and 24 December 2020) and 366 days (for notices served from 25 December 2020). The same limits apply to taking control of goods for the first time pursuant to a valid enforcement notice.
We now have what we are told will be the final set of extensions (whether that proves to be the case remains to be seen).
Accordingly, without the Government making any further changes to the thresholds before CRAR can be exercised, the restrictions will now be in place until 31 March 2021.
As we covered in our previous briefing note, restrictions on service of statutory demands and winding up petitions was included as part of the Corporate Insolvency and Governance Act 2020 (“CIGA 2020”).
In keeping with the other changes, the protections afforded by CIGA 2020 have also been extended to 31 March 2021.
Update on forfeiture moratorium
Ever since the Coronavirus Act 2020 came into force on 25 March, a moratorium has been in place preventing the forfeiture of commercial leases for unpaid rent – currently due to expire on 30 June 2020. This has now been extended to 31 March 2021 (see our Insight)
This does not affect the ability of landlords to take steps as a prelude to forfeiture in connection with other breaches of covenant, e.g. subletting, disrepair etc. Section 146 Notices in respect of such breaches remain a valid approach in the enforcement armoury open to landlords. However, the practical impact of such an approach is severely limited by the ongoing forfeiture restrictions.
For more information, please refer to our latest guidance on our December 2020 Quarter Day page which can be found here.
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