Commercial rent arrears – what now for landlords and tenants?
Restrictions on the remedies usually available to landlords for recovering rent arrears have been in place since March 2020 - with forfeiture, CRAR and winding-up petitions all off the table for the past 2 years.
In preparation for the return of these remedies, the government has been putting in place measures to deal with commercial lease arrears which accrued during business closures resulting from the pandemic. In particular, the Commercial Rent (Coronavirus) Act received Royal Assent on 24 March 2022, providing for an unprecedented binding arbitration process in relation to certain “ring-fenced” arrears.
Landlords and tenants can find guidance on the new scheme in our insights:
- New Arbitration Scheme for Commercial Arrears: Landlords and tenants are you ready?
- The government’s Commercial Rent (Coronavirus) Bill and revised Code of Practice
- Property Patter: the new arbitration system for covid rent arrears
Of course, not all arrears will fall within the new scheme and it is worth remembering that the courts have indicated a willingness to grant summary judgment to landlords in appropriate circumstances. Summaries of the key cases can be found using the links below.
Bank of New York Mellon (International) Ltd v Cine-UK Ltd is summarised here – although this case is being appealed and is due to be heard in June 2022; and
London Trocadero (2015) LLP v Picturehouse Cinemas Ltd is summarised here – although this case is being appealed and is due to be heard in June 2022.
Of course, landlords may now prefer to return to their more “traditional” remedies for dealing with arrears which are not subject to the new scheme – such as CRAR and forfeiture. The option of serving statutory demands and/or winding-up petitions is also now on the horizon – see further details in our quick read: This is not a wind up…. Restrictions on winding-up petitions to end on 31 March 2022
It will be interesting to see how landlords respond to the return of their traditional remedies for recovering arrears which are not protected by the new Act. Much will inevitably depend upon their view of the market and the viability of their tenant’s businesses.
In the meantime, tenants looking to use the government’s new arbitration scheme for ring-fenced arrears will need to get prepared. The scheme will require them to provide significant amounts of detailed financial information, including as to their viability and references to arbitration must be made within 6 months.