09 July, 2020
Subject to Corporate Insolvency and Governance Bill 2019-21 ("CIGB") being passed unamended
The CIGB introduces a moratorium which will provide a breathing space for eligible companies to allow them to enter into negotiations with creditors and will restrict filings for insolvency proceedings and enforcement and legal proceedings, and the enforcement of security during that period. Landlord's still have some available remedies to fall back on.
Forfeiture -The Landlord takes back possession of the premises by court proceedings or by peaceable re-entry i.e., by instructing bailiffs to change the locks. For Landlords this is suspended under the Coronavirus Act 2020 from 26 March until 30 September. This will not be available for a tenant who is granted a moratorium under the CIGB, unless with permission of the Court.
CRAR (Commercial Rent Arrears Recovery) - The Landlord instructs an enforcement agent to serve notice, enter the premises, take control of a tenant's goods and sell them to recover the value of the rent arrears (normally available if 7 days' rent owing). This is available to Landlords but only if 90 days owing.
Court Proceedings - Proceedings are issued at Court for the debt - but judgment will still need to be enforced once obtained. This is still available to the Landlord. This will not be available for a tenant who is granted a moratorium under the CIGB.
Statutory Demand - A statutory demand is a written demand for payment of a debt and can be served for rent arrears of at least £750 (company tenant) or £5,000 (individual tenant) - failure to pay is used to establish insolvency for a winding-up petition to be presented. The Landlord can use this for a tenant who is not a UK company. For tenants who are UK companies, there is no point as statutory demands issued 1 March to 30 September, or one month after the law comes into force, will be void. It is available to Tenants but no point due to winding up procedures not being available.
Winding-up petition - A winding-up petition is a court application for a debtor to be put into compulsory liquidation on the grounds that it is unable to pay its debts. Yes but: Not on the basis of a statutory demand. The Landlord can only use this if the landlord believes EITHER that coronavirus has not had a financial effect on the company OR that the company would have been unable to pay its debts irrespective of the financial effect of coronavirus. This will not be available for a tenant who is granted a moratorium under the CIGB.
Rent deposit - A rent deposit may be taken when the lease is granted as protection against default - landlord can draw down from this if rent is unpaid. This is available to the Landlord. It is possibly available to the Tenant depending on terms and whether it constitutes enforcing security over the tenant's property which is prohibited.
Recover from Guarantor - Third parties may have indemnified the tenant's liabilities, either as guarantor under the lease, or by being a former tenant ("old lease" or AGA). Former tenants must be served with a s.17 notice under the (Landlord and Tenant (Covenants) Act 1995) within 6 months of the debt arising. This is still available to the Landlord and a tenant who is granted a moratorium under the CIGB.
For more information contact Laura Hallett Lea in our Business Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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