Commercial Landlords: Recovering rent arrears from tenant
Commercial landlords will be disappointed to learn that the government has announced the extension to 25th March 2022 of the period suspending certain options which may be available to a landlord in dealing with unpaid rent (and other sums falling due under a lease).
It was hoped that the moratorium on taking steps to forfeit a lease for non-payment of rent or taking control of goods by exercising Commercial Rent Arrears Recovery (CRAR) would end on 30th June 2021. Legislation confirming the extension to 25th March 2022 is currently awaited.
A landlord cannot currently forfeit a lease and take back possession of the property for arrears of rent (and other sums such as service charges, insurance etc). However, subject to the terms of the lease, there is nothing to prevent termination of the lease for other, non-monetary breaches.
Although there will be a continuing prohibition on forfeiture and CRAR, there is nothing in the legislation preventing a landlord commencing debt recovery proceedings and obtaining a County Court Judgment (CCJ). This might be especially useful where a landlord believes that a tenant does have the means to pay the rent due but is simply refusing to do so, using the Coronavirus restrictions as an excuse. The threat of a CCJ and the impact it might have on its credit rating may be an incentive for a recalcitrant tenant to pay up.
Other options to recover unpaid rent potentially available to a landlord are:-
- Drawing down on any rent deposit in place
- Pursuing a former tenant or guarantor under an authorised guarantee agreement
- Serving a statutory demand – but a winding-up petition cannot be presented before 30th June 2021 (this is to be extended to 30th September 2021)
Landlords may be aware of the Code of Practice published on 19 June 2020 with regard to commercial premises and leases.
This Code strongly encourages landlords and tenants to communicate and negotiate, including rent-free periods and moratoria. However, unless extended, the code will cease to apply after 24th June 2021.
Ellis Jones have a specialised Dispute Resolution team available to assist with enquiries regarding recovering rent arrears from tenants. Should you wish to discuss this further, please do not hesitate to contact our specialist Dispute Resolution team on 01202 525333 or firstname.lastname@example.org.