Can commercial lessees now ‘relax’ given the extended Government moratorium on forfeiture for non payment of rent?

20 Jul 2021

I don’t think so. In fact, unless further protections are introduced, I suspect commercial lessees who have either not paid rent during the pandemic, or allowed substantial arrears to accrue during this period, may be in for a nasty shock from 1 October of this year. 

Why? Because for the first time since 31 March 2021, restrictions on either serving statutory demands and/or issuing winding petitions as a precursor to bankruptcy or winding up proceedings against a defaulting lessee, no longer share the same ‘moratorium date’. From 1 October this year, these potent weapons in the armoury of commercial landlords, come back into play, entitling landlords to take enforcement in relation to any outstanding rent arrears, irrespective of whether they have accrued during the pandemic.

The inability of Landlords to forfeit a leases for non payment of rent over the last 15 months has, in many cases, been a source of huge frustration. However, in the current economic climate, forfeiture may be the last thing they want.  Being landed with an empty and/or dilapidated property, with the added burden of a liability for business rates, is not overly attractive at anytime and certainly not in the present climate for commercial property.

Current enforcement options other than forfeiture include:
  • Drawing down on a rent deposit; 
  • Pursuing guarantors or former tenants, although to be enforceable, statutory notices may need to be served within 6 months of rent falling due;
  • Issuing Court proceedings to recover the arrears by way of monetary judgment.
The above options all provide possible financial respite for landlords. However, the further ability to threaten and/or commence insolvency proceeding against defaulting lessees from 1 October this year will be ignored by many lessees at their peril.

As a further sting in the tail, where an individual or corporate lessee becomes insolvent, this (of itself) constitutes a separate breach of covenant, entitling a Landlord to embark on forfeiture action, even where this arises from non payment of rent!

Should you wish to further discuss any of the issues raised above, contact Keith Pearlman by email or by phone on 020 7822 1605

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