The Commercial Rent (Coronavirus) Act 2022, which will receive Royal Assent today, 24 March, restricts landlords from pursuing tenants for unpaid rent and other sums that fell due during the "protected period", where premises were subject to mandatory closure requirements under the Coronavirus legislation. For non-essential retail premises, the protected period is 21 March 2020 to 12 April 2021, and for restaurants and leisure premises, the protected period is 21 March 2020 to 18 July 2021.
Rent and service charge arrears attributable to the protected period are now subject to a mandatory arbitration scheme to determine whether the tenant is entitled to relief from payment of some or all of the arrears.
Landlords will remain unable to take enforcement action in relation to such "protected rent debt" until the conclusion of the arbitration process or for a further six months where a reference to arbitration is not made in that time frame. For further details on the arbitration process please see our briefing on the new arbitration process for resolving COVID-19 commercial rent debts.
Forfeiture for unprotected rent debt now permitted
For rent and service charge arrears which are not protected rent debt under the Act (and therefore ineligible for the arbitration scheme), the moratorium on forfeiture which was imposed by the Coronavirus Act 2020 will expire at 11.59pm on 25 March.
What does this mean in practice?
Once the restrictions lift, from 12:01am on 26 March landlords will be able to forfeit leases for unprotected rent debt either by peaceable re-entry (i.e. changing the locks) or through possession proceedings in the County Court provided the rent in question is not protected rent debt.
When will a landlord be able to forfeit?
In relation to pre-March 2022 unprotected rent debts, landlords will be able to forfeit from 26 March onwards.
For rent which falls due on the March quarter day, the right to forfeit will not arise until the rent has been unpaid for the grace period specified in the lease (usually 14 or 21 days).
Tenants who wish to protect themselves from the risk of forfeiture should ensure that all unprotected rent debt is paid by 25 March.
What about waiver?
The Coronavirus Act 2020 provided that a landlord's right to forfeit for unpaid rent would not be waived during the moratorium period other than by a landlord giving an express waiver in writing. That will no longer be the case from 26 March.
The right to forfeit will be waived if a landlord acts in a way that is consistent with the continuation of the lease. Demanding or accepting the March quarter's rent after 26 March will waive the right to forfeit for prior arrears. This may have an impact on what a tenant has to pay in order to obtain relief from forfeiture.
When will a tenant be entitled to relief?
Where a lease has been forfeited for unpaid rent, a tenant will usually be entitled to relief from forfeiture (i.e. the reinstatement of the lease) if it pays "all rent in arrears" together with the landlord's costs and expenses. Whether payment of all arrears is actually required will vary from case to case depending on the circumstances of the forfeiture.
What about Commercial Rent Arrears Recovery ("CRAR")?
Landlords' right to CRAR for commercial rent arrears, (i.e. to instruct bailiffs to attend the premises and seize goods) is also being restored on 26 March for unprotected rent debt.
Are the restrictions on the insolvency regime also lifting?
From 1 April landlords will once again be able to serve statutory demands and issue winding up petitions for unprotected commercial rent.
How we can help
Mishcon de Reya’s Property Litigation team can assist landlords in developing strategies for maximising the recovery of unprotected rent debt using forfeiture, CRAR and insolvency proceedings, as well as through negotiation and other methods of alternative dispute resolution.
The team is also able to help tenants avoid forfeiture, apply for relief from forfeiture, and assist in the negotiation and settlement of disputed rent claims.
We can also support landlords and tenants through the new arbitration scheme in relation to protected rent debt.