Commercial Property Landlords Banned From Making Statutory Demands Where Tenant Default Result Of Covid-19 Crisis
As the Government continues to seek to protect UK business operations during the ongoing pandemic, commercial landlords are now temporarily banned from issuing statutory demands and winding up petitions against tenants unable to pay rent due to the impact of the Covid-19 crisis.
By way of background, a statutory demand is a pre-cursor to a winding up petition which can be issued by a creditor where a corporate debtor owes not less than £750. If the debt is then not paid within 21 days, the creditor can then proceed with its winding up petition.
Whilst in the current climate it is unlikely that many landlords will be pursuing statutory demands and/or winding up petitions against tenants (not least because of the difficulty in finding alternative tenants or occupiers to take over should the company fold), the new measures are a reflection on the fact that statutory demands have sometimes been used as a mechanism to apply pressure on tenants to clear existing debts.
It is important to note the restriction does not prevent winding up petitions being made across the board, but simply that these will not be possible where a tenant’s inability to pay is a direct result of the current Covid-19 crisis.
In addition to the above, commercial landlords are also now prevented from using commercial rent arrears recovery (CRAR) unless a minimum of 90 days unpaid rent is outstanding.
As with the moratorium on forfeiture reported previously, the above restrictions are currently set to be in place until 30 June, but may be extended depending on Government policy.
Whilst the above will obviously be welcomed by commercial tenants this will undoubtedly impact on landlord income streams and, in turn, their ability to service their own commitments in the short term. Indeed, this is a point the Government has acknowledged and we await further updates as to whether any measures to tackle the same will be introduced.
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