Since the beginning of the pandemic, landlords and tenants have experienced significant limitations in the way rent arrears could be pursued. We first saw the moratorium on the recovery of Covid related arrears, and more recently we’ve experienced the implementation of the Covid arrears arbitration scheme.
Since the beginning of the pandemic, landlords and tenants have experienced significant limitations in the way rent arrears could be pursued. We first saw the moratorium on the recovery of Covid related arrears, and more recently we’ve experienced the implementation of the Covid arrears arbitration scheme. However, the arbitration scheme closed to new referrals at the end of September and all old methods of rent recovery are now back on the table. We have not been in this position since before March 2020, so it is useful for both landlords and tenants to consider what those options are and the steps landlords can now take. It is important to note that these options are available in respect of all outstanding arrears, whether or not they were previously considered as Covid arrears/protected debt under the temporary Covid measures.
Landlords can issue a money claim for a judgment ordering the tenant to pay the outstanding debt plus interest and legal costs. A judgment can be enforced through various measures including the seizing of goods or the charging of property owned by the tenant.
Assuming the tenant has no counterclaim and no reason to withhold rent pursuant to a lease, the process of obtaining a judgment may be relatively straight forward for a landlord. A landlord would often be able to obtain a default or summary judgment and avoid reaching trial.
Most modern commercial leases include a forfeiture clause, enabling a landlord to terminate the lease by reason of non-payment of rent. This can be done by way of a Court application or by simply changing the locks. In the case of non-payment of rent, the landlord is not required to give the tenant any prior notice before terminating the lease.
Tenants can apply to the Court for relief from forfeiture and, if successful, the Court will make an order reinstating the lease. However, this is only available for a tenant if it pays the outstanding arrears and the landlord’s costs. Forfeiture is therefore an effective method of recovering arrears quickly in cases where defaulting tenants wish to remain in occupation. However, this option is less attractive for landlords if the demand for the property would be low. Landlords risk the tenant walking away from the property (and not claiming relief from forfeiture) and being left with a vacant unit and the arrears still outstanding.
It should also be noted that whilst this option appears to be quick and straightforward, there are many potential pitfalls for a landlord and a landlord could find itself to have wrongfully forfeited a lease. We therefore advise to seek legal advice before going down this route.
CRAR involves instructing bailiffs to take possession of items within property demised to the tenant equal to the value of the unpaid arrears. Even prior to Covid, CRAR has not been as popular as other enforcement methods due to the extensive limitations on the landlord’s ability to seize goods. It also only relates to principal rent and not service charge or other sums due under the lease.
This option is worth considering if landlords want to recover arrears quickly whilst leaving the lease in full force (and the tenant’s liabilities continuing). In addition, the potential bad publicity arising from a visit by an enforcement agents/bailiff is often enough to make a tenant settle their arrears promptly.
Insolvency procedures are appropriate if a landlord considers a tenant to be unable to pay its debts as they fall due. Non-payment of an undisputed debt (such as rent) would normally give a landlord sufficient grounds to conclude that the tenant is unable to pay and therefore initiate bankruptcy (for individuals) or winding up (for companies) proceedings. This can therefore be an effective method of recovering arrears from tenants that wish to remain solvent.
The above covers the principal options for landlords in recovering rent arrears. In addition, we would advise landlords to review leases for any other security provisions (including rent deposits and guarantors) which could be used instead of or in addition to these measures.
Many landlords have been out of pocket for over two years now and if the parties have been unable to negotiate a deal during this time, it is likely that we will see landlords using the options detailed above to recover rental arrears. Whether you are a landlord or a tenant, it is therefore important that you are aware of the rent recovery options now available. If you have any queries, our property litigation team can advise further as to which option would be the most appropriate given the circumstances of your case.
On 2 November 2022, the Supreme Court handed down its judgment in the much awaiting case of Hillside Parks Ltd v Snowdonia National Park Authority [2022] UKSC 30. The Court’s judgment suggests that the long established practice of using drop-in applications is in fact much more restricted than previously thought. This judgment therefore has significant implications for both the developers and local planning authorities.
National law firm Browne Jacobson has advised long standing retail client, Wilko on the sale and leaseback of its Nottinghamshire distribution centre in Worksop to logistics specialist DHL for £48m.
Browne Jacobson has appointed Amy Chapman, the former Group Legal Director of global built environment experts Mace Group, as its first Non-Executive Director (NED) of its Construction & Real Estate sector strategy board.
Across the UK, homelessness is an urgent crisis, and one that is set to grow amid the rising cost of living. Local authorities are at the forefront of responding to this crisis, but with a lack of properties that are suitable for social housing across the UK, vulnerable individuals and families are often housed in temporary accommodation.
Since the beginning of the pandemic, landlords and tenants have experienced significant limitations in the way rent arrears could be pursued. We first saw the moratorium on the recovery of Covid related arrears, and more recently we’ve experienced the implementation of the Covid arrears arbitration scheme.
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As the Grenfell Inquiry continues, how have the Phase 1 recommendations changed the fire safety and building safety landscape?
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We welcome you back after the festive break to our first Private Sector Development Club of the year. Join us on-demand for four high level presentations with a chance for you to ask questions to our experts.
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The government has now published new regulations to replace the winding up restrictions mentioned above from 1 October 2021. The key point of interest from a landlord and tenant perspective is that these new regulations will prevent a landlord from presenting a winding up petition to recover rent until 31 March 2022 where the sums are unpaid by the tenant because of the financial effect of the pandemic.
Last week, the government published a policy statement to deal with rent arrears accrued during the pandemic for those businesses affected by the pandemic.
A court will not alter an unambiguous contractual term merely because it is unduly favourable to one party, imprudent or unreasonable or because it provides for one party to pay too high a price for something. However, a court can correct the literal meaning of a contractual provision by construction if it is clear both that a mistake has been made and what the provision was intended to say.
Break rights have proved a fertile source of litigation over the last few years. More often than not, tenants have found themselves on the wrong end of the decisions. However, a Court of Appeal decision yesterday has bucked that trend.
The delay in the full easing of lockdown restrictions and the knock on effect for certain tenants (particularly those in the hospitality and entertainment industry) has clearly caused a change of heart and the government has now announced a further extension of the restrictions.
One of the requirements for tenants to contract out of the security of tenure regime contained in the Landlord and Tenant Act 1954 is that they make a simple or statutory declaration before entering into the lease.
Landlords should reconsider summary judgment if a Part 26A restructuring plan is pending.
A landlord’s claim for summary judgment to recover rent and service charge arrears accrued since the start of the pandemic against a non-essential retailer succeeded. Like London buses, a second such case has followed hot on its heels.
Whilst this decision may not be surprising, it will undoubtedly send a chill down the spine of retailers in a similar position to The Fragrance Shop.
The government announced that it would be launching a call for evidence to help monitor the overall progress of negotiations between landlords and tenants for paying or writing off outstanding rents. This call for evidence has now been published.
The government was extending to 31 March 2021 the various tenant protections it has brought in since the pandemic began. However, that announcement of course pre-dated the current lockdown and it will come as a surprise to no-one that, despite this, the protections have been extended again until 30 June 2021.
Due to numerous recent issues affecting the property market more and more break notices are being served by commercial tenants. At the same time, more and more tenants are seeking break rights in their new leases in order to provide them with flexibility when it comes to their real estate.
A few months ago, we discussed a case where the Court of Appeal ruled that the wording of a lease precluded the tenant from arguing that certain costs should not have been included in the service charge calculation. A recent high-profile case concerns a broadly similar issue, this time in relation to the proportion of the landlord’s costs payable by a tenant.
The government was extending to 31 December 2020 the various tenant protections it has brought in since the pandemic began. Perhaps not surprisingly, those protections have now been extended again until 31 March 2021.
The Court of Appeal has ruled that the wording of a service charge clause precluded a tenant from challenging the sums claimed by a landlord.
Watch our on-demand video about our private sector development club, where we will be discussing, planning updates, permitted development and negotiating development agreements.
Break rights have proved a fertile source of litigation over the last few years. Courts have consistently required strict compliance with the terms of those rights.
We reported that the Government was extending to 30 September 2020 the various tenant protections it has brought in since the pandemic began. Perhaps not surprisingly, those protections have now been extended again until 31 December 2020.
