Covid-19 Rent Arrears Recovery

Covid-19 Update on Rent Arrears Recovery

The Coronavirus Act 2020 was introduced in response to the Coronavirus Pandemic and saw Business Tenants (including contracted out tenants) being protected from forfeiture & CRAR (Commercial Rent Arears Recovery) up to the 25th March 2022 for non-payment of rent.

What constitutes ‘ringfenced arrears’?

Any debt due between the 20th March 2020 and the earlier of the 25th March 2022 or the last date the tenants business was legally required to be shut (ignoring any period where you were allowed to re-open but then had to close again).

Protection of ringfenced arears:

• No forfeiture for non-payment of ringfenced arrears
• No CRAR based on ringfenced arrears
• No suing tenant (or guarantors) for ringfenced arrears
• No dipping into rent deposits for ringfenced arrears (unless already carried out)
• No winding-up or bankruptcy petitions based on ringfenced arrears

How can you recover the ‘ringfenced arrears’?

The Landlord and Tenant can either agree their own payment plan or the matter can go to arbitration.

From the 25th March 2020 a Landlord only has 6 months (to 25th August 2022) to apply to arbitration. Otherwise, the ringfenced rent will be written off.

Any debt that falls outside of the Ringfenced dates can be recovered via normal channels.

What happens at arbitration?

Arbitrators can:

• Write off arrears in whole or part
• Set a timeline for payment
• And reduce / waive interest payable

Arbitrators principally must preserve the viability of the Tenant’s business so far as this is consistent with preserving the Landlords solvency.

Woolley and Wallis can assist in advising on what constitutes as ‘ringfenced arrears’, negotiating a payment plan on behalf of either the Landlord or Tenant and assisting with the process of arbitration.

If you wish to discuss your strategy in anticipation of the passing of the Bill, don’t hesitate to get in touch with a member of our team to ensure that you are best prepared for when the new scheme comes into force.

M.casebow@w-w.co.uk 01722 330335