The covid-19 pandemic has caused issues for landlords and tenants alike since March 2020 and the government has attempted to minimise disruption by placing a number of restrictions on a landlord's ability to recover rent and possession of premises from tenants.
Commercial rent arrears recovery ("CRAR")
CRAR is a method of enforcement for landlords to recover rent arrears of commercial property leases. CRAR allows enforcement agents to take control of a tenant's goods to recover the value of any arrears. Whilst this seems like an attractive option (owing to the nuisance this will cause for tenants) landlords should be wary of waiving the right of forfeit when using the CRAR procedure following the High Court judgment in Thirunavukkrasu v Brar and another, which confirmed that a landlords right to forfeit had been waived by the use of CRAR. Landlords are currently protected from waiving their right to forfeit as a result of the restrictions set out below.
Forfeiture
The ability to forfeit a lease allows a landlord to re-enter the property and terminate a lease following a breach by its tenant. In respect of non-payment of rent, a landlord need not give notice to a tenant of the intention to forfeit and it can do so by peaceable re-entry, which is effected by the landlord engaging a bailiff to attend the property and change the locks.
Restrictions
Restrictions were initially introduced in March and April 2020 in respect of both the CRAR procedure and forfeiture:
- In April 2020 restrictions were placed on the CRAR procedure so as to require a sum equivalent to 90 days' rent arrears before CRAR could take place. It had previously been seven days or more. On 15 September 2020, the Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020 (SI 2020/1002) ("the Regulations") were made, which come into force on 29 September 2020. The Regulations provide further protection to tenants of commercial leases by increasing the minimum amount of unpaid rent before CRAR can take place to:
- 276 days' rent from 29 September 2020 until 24 December 2020 (inclusive); and
- 366 days' rent from 25 December 2020.
The effect of the Regulations is that any tenants whose first arrears fell due on the March 2020 quarter date are protected from CRAR until 26 March 2021. This provides additional protections to tenants who are in financial difficult as a result of the covid-19 pandemic, whereas tenants who were previously in arrears are only protected from CRAR until 24 December 2020.
- The Coronavirus Act 2020, amongst other things, suspended rights of forfeiture for non-payment of rent contained within business tenancies until 30 June 2020. This was extended to 30 September 2020 and was subsequently extended to 31 December 2020. For more information on this click here. Tenants are protected from forfeiture of their lease until 31 December 2020 regardless of when any arrears fell due.
- As landlords are unable to forfeit business tenancies for non-payment of rent, they are protected from waiving their right to forfeit under section 82 of the Coronavirus Act until 31 December 2020. Landlords can therefore exercise CRAR or take other action (subject to any other restrictions) until 31 December 2020 without waiving their right to forfeit in January 2021. If such action is taken after 31 December 2020 landlords will not currently have this protection.
It is interesting to note the government appears to be separating tenants into two categories and providing additional support to those who were not in rent arrears prior to the pandemic. Time will tell whether these restrictions strike the right balance for struggling businesses and landlords.
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