Friday, 18 June 2021

COVID-19: Restrictions on Forfeiture to Stay until 25 March 2022

 The government has issued a press release announcing that the restrictions on forfeiture of business tenancies for non-payment of rent are to continue in England until 25 March 2022.

The press release says this is to give places such as nightclubs and other hospitality businesses the help they need to recover from the pandemic.

The extension of the ban on forfeiture is to ensure that the sectors who are unable to open have enough time to come to an agreement with their landlord without the threat of eviction.

Further measures have also been announced, including:

·       Primary legislation is to be introduced in this parliamentary session to ringfence rent arrears that have built up due to a business having to remain closed during the pandemic. Landlords are expected to make allowances for the ringfenced rent arrears from these specific periods of closure due to the pandemic and share the financial impact with their tenants.

·       The press release says the legislation will “help” tenants and landlords to work together to come to an agreement on how to handle the money owed, for example, waiving some of the amount due or agreeing a longer-term repayment plan. If agreement cannot be reached, a binding arbitration process will be put in place that ensures a legally binding agreement is made that both parties must adhere to.

·       Service of statutory demands and winding up petitions will remain restricted for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.

·       The Ministry of Justice have confirmed that the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords will also be extended. The minimum net unpaid rent that must be outstanding before commercial rent arrears recovery (CRAR) can be used will remain at 554 days.

The press release says that to ensure landlords are protected, the government is “making clear that businesses who are able to pay rent, must do so”. Tenants should start paying their rent as soon as restrictions change, and they are given the green light to open.

The measures have been welcomed by the hospitality sector.

We will have to wait for the detail on how these measures will work.

The press release says the extension of the forfeiture ban applies to all businesses, but the new measures that will be introduced by primary legislation will only cover those impacted by closures. This means that rent debt accumulated before March 2020 and after the date when relevant sector restrictions on trading are lifted, will be actionable by landlords as soon as the tenant protection measures are lifted.

The government has also confirmed that its review of commercial landlord and tenant legislation will be launched later this year and will consider a broad range of issues including the Landlord & Tenant Act 1954 Part II, different models of rent payment, and the impact of Coronavirus on the market.

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