In response to the COVID-19 epidemic, the Government has made various changes designed to protect tenants and their businesses:
Some of the above measures may be extended.
What can a Landlord do?
Landlords can take the following steps:
The Corporate Insolvency and Government Bill (“the Bill”) had its second reading on 9 June 2020 and it is anticipated that it will progress through the House of Lords as quickly as it did through the Commons. The Bill makes provisions to assist companies in financial difficulties including temporary changes to the law relating to governance and regulation of companies and other entities.
Among the various changes, the Bill incudes further emergency measures to protect commercial tenants from winding up proceedings which includes restrictions on the making of a winding up order where the debtor is unable to pay the debt because of the Covid-19 outbreak. Further, all winding-up petitions which have been presented between 27 April 2020 and 30 June 2020 and are based on the company’s inability to pay its debt will be reviewed by the court before being issued.
Despite the Bill not yet being enacted, the courts have taken the Bill into account in the recent case of Re A Company (Injunction to Restrain Presentation of Petition) . In this case the tenant failed to pay the rent and service charge in mid-April 202. The landlord served a statutory demand and then applied for a winding up petition. At the hearing the Judge held that it was likely that hearing of the petition would take place after the Bill can into force and the provisions would apply retrospectively from 27 April 2020.
Accordingly, the court had to consider whether the COVID-19 outbreak had a financial effect on the Tenant, prior to presentation of petition, and if so whether the tenant would have been insolvent but for the outbreak. The court found that COVID-19 had a financial effect on the company and the petition would not have otherwise been made.The Injunction was, therefore, awarded restraining the landlord from proceeding with its winding up petition against the tenant.
On 19 June 2020, the Government announced that it will be extending the moratorium on forfeiture from 30 June 2020 to 30 September 2020, and:
If the Government puts into effect the extensions it announced on 19 June 2020, the landlord’s ability to take enforcement with regard to serving statutory demands, using the CRAR procedure or peaceably forfeiting the lease, has been curtailed until 30 September 2020.
In relation to any existing petitions for winding up/bankruptcy, if the tenant is able to show that but for the COVID-19 outbreak they would have been solvent, it is unlikely that a landlord’s petition will proceed. Unless it can be shown otherwise, petitioning for winding up/bankruptcy would not be recommended.
This article is not a substitute for legal advice. Should you require assistance in relation to property litigation issues, please contact a member of our property litigation team:
Toby Matthews, Senior Associate Tel No. 0203 827 6107 Email: TM@axiomstone.co.uk
Mira Arezina, Associate Tel No. 0203 827 6100 Email: MIA@axiomstone.co.uk