Commercial Rent Arrears Recovery Extended

Government extends the moratorium on Coronavirus-related commercial rent forfeiture

The government announced on 16 June 2021 that the ban on commercial evictions and Commercial Rent Arrears Recovery (CRAR) has been further extended until 25 March 2022.  This has been extended in order to continue to protect tenants from possible eviction and give them breathing space to help protect their jobs.

No doubt this is a welcome extension for many businesses as they try to recover from this pandemic, especially in light of the pause of the restrictions being lifted for a further 4 weeks.  However, landlords may not share this feeling as unpaid rent increases with what may feel like no end in sight for action to be taken.

What should be considered, especially by tenants, is that whilst the extension may feel like welcome relief, this is not a rent free period, the rent is still accruing during this time and unfortunately for most leases, interest accrues on the unpaid rent at a specified rate. This will be payable in addition to the rent arrears at the end of the suspension period.

What is clear from the government announcement is that if your business is open, then you are not protected by this legislation.  If you can pay your rent, if you have been given the green light to reopen your business, then you should do so and begin to make payments on your rent and any accrued debt.

The government has put in place this time a more favourable plan for landlords – a “back-stop”.  As such, in the first instance, landlords and tenants should attempt to reach their own agreements regarding any accrued unpaid rent and look to come up with an agreement between themselves for a payment plan or perhaps even waiving some of the unpaid rent.

Should an agreement not be able to be reached then the next step will be to seek arbitration.  This will be a legally binding agreement upon both parties and it must be adhered to.  The government believe that the new arbitration process they have put in place will give both tenants and landlords peace of mind that any Coronavirus debts will be settled fairly and with finality.  However, arbitration should be seen as more of a last resort.  It is much better for all parties concerned to reach their own mutual agreement.

For landlords where the rent remains unpaid, you were able to use the Commercial Rent Arrears Recovery process to seize goods for the value of the debt.  However, the government have now announced that the total number of days’ outstanding rent is required to be greater than 554 days before action for unpaid rent can be taken after 25 March 2022.  This will certainly increase the delay landlords will experience in trying to seek restitution for unpaid rent.

If, as a landlord, you really feel that you cannot continue with your tenant in situ with unpaid rent and you can come to no agreement regarding a payment plan and you simply feel that you cannot wait until after March 2022, then your only other course of action at the moment will be to start court proceedings for a debt claim.  However, this is likely to be an extremely costly and drawn out process and one that is not recommended.

On reflection, whilst this extension may feel like a welcome relief to tenants, it is a good idea to use this time to converse with your landlord and start getting a plan in place for any unpaid rent that is starting to accrue.  If you are a tenant contemplating your next steps or a landlord faced with tenants asking about their options, feel free to contact our team at Fraser Dawbarns for some advice on next steps.

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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances.  Fraser Dawbarns LLP are always happy to provide such advice.