Global menu

Our global pages

Close

Lawbite: Forfeiture moratorium to be extended … to March 2022

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate litigation - LawBite

17-06-2021

 

Government announcements confirming the extension of restrictions on enforcement of commercial leases during Covid

The forfeiture moratorium, originally put in place by the Coronavirus Act 2020, is to be further extended in England from the existing expiry date of 30 June 2021, to 25 March 2022.  The announcement was made in the House of Commons yesterday (16 June) by Communities Secretary, Robert Jenrick.

In its press release confirming the announcement, the government state that the purpose of the extension is to give commercial tenants the breathing space needed and in order to help protect jobs.

Whilst this moratorium is in place the government plan to introduce legislation to support the resolution of disputes relating to commercial arrears accrued during the pandemic. The legislation will ringfence those arrears accrued whilst businesses have been closed during the pandemic, with a view that landlords make “allowances” for these arrears and share the financial impact with their tenants. These “allowances” could involve waiver of part of the rent or a longer-term repayment plan. If an agreement cannot be reached between a landlord and tenant through negotiations the legislation will mandate binding arbitration.

The announcement also confirms that the restrictions on a landlord’s ability to use the Commercial Rent Arrears Recovery (“CRAR”) scheme for enforcement will also be extended until March 2022.

The decision comes after the government’s Call for Evidence on Commercial Rents and Covid-19 in England.  The Call for Evidence, which ended in May 2021, sought views on the best way to withdraw or replace the measures in place to protect commercial tenants and the jobs they supported. 

On the same day the government announced that the temporary restrictions on the use of winding-up petitions and statutory demands will also be extended from 30 June 2021 to 30 September 2021. These restrictions apply in England, Wales and Scotland. 

In Scotland, the temporary extension to the period landlords need to wait before they can terminate a lease on the basis of irritancy (an equivalent of forfeiture) on the grounds of monetary breach is in place until 30 September 2021.  The extension means that landlords need to wait 14 weeks rather than 2 or 3 weeks.

Key points  

  • landlords may well be dismayed by the recent move.  Their ability to enforce where rent is unpaid has been severely impacted during the pandemic. They may take some reassurance from the fact that the government makes it clear in its announcement that tenants who are able to pay should do so. In addition, a landlord’s ability to commence court proceedings for rental arrears has not (at least for the time being) been impacted, and recent judgments demonstrate that tenants may face an uphill battle defending claims for rent accrued during the pandemic
  • we will need to wait for details of the further legislation proposed.  It will be interesting to see how it reflects the “ringfencing” of arrears – the government announcement suggests that it should only relate to arrears accrued whilst businesses were closed, but since the start of the pandemic many businesses have adapted rather than closed, offering online or takeaway services where they didn’t before for example.  Will those businesses’ rent be ringfenced?
  • we wait to see whether the forfeiture moratorium will also be extended in Wales
  • the government has confirmed that its response to the call for evidence on commercial tenancies will be published in due course
  • the review of commercial landlord and tenant legislation announced last year is still planned and is to be launched later this year. The review will consider a broad range of issues including the Landlord & Tenant Act 1954 Part II, different models of rent payment, and the impact of the pandemic on the market