Reasons to choose Wilson Browne
After 2 years, the moratorium on landlord remedies which affected commercial rent arrears recovery (CRAR) and forfeiture of lease finally came to an end on 25th March 2022.
To many commercial landlords, this will be most welcome news, as a vast amount will have tenants in arrears and perhaps need to take possession of their property.
The Commercial Rent (Coronavirus) Act 2022 (CR(C)A 2022) came into force on the 24th of March 2022 and affects both CRAR and forfeiture, this article will highlight the key implications of this.
CRAR can be used by the Landlord if rent is not paid by the due date. It doesn’t require a court order and can only be used to recover rent – not other charges such as insurance and service charges. There must be a lease/written rental agreement in place to use this.
A landlord can exercise their right to regain possession of commercial premises before the expiration of the lease by forfeiting it. The breach of the terms must be because of non-payment of the rent and there must be a forfeiture clause within the lease. Forfeiture means the peaceful re-entry to the unoccupied property by certain enforcement agents, whereby you can change the locks and end the tenants’ rights.
Whilst the processes of the above 2 remedies remain unchanged, the CR(C)A 2022 imposes restrictions on them. It does this by ringfencing the rent that accrued during a ‘protected period’ and allowing the liability for this ‘protected rent’ to be referred to arbitration. See the criteria for ‘protected rent’:
- A business tenancy – defined by Part II of the Landlord and Tenant Act 1954
- Where the business and/or premises were forced to fully/partially close under Coronavirus regulations. It doesn’t matter if some limited activities were allowed despite the requirement to close.
- The arrears related to the “relevant period” which is beginning at or after 2 pm on 21st March 2020 and ending at or before 11:55 pm on 18th July 2021 (in England) or 6 am on 7th August 2021 (in Wales)
If the arrears fall under the above criteria for protecting arears, the only option for both the Landlord and Tenant is arbitration. This must be done via a Government-approved arbitration body.
However, a Landlord is prevented from using several remedies during the period which begins the day CR(C)A 2022 was passed and ends either after the 6 months arbitration application period passes or when arbitration has concluded, listed below:
- Making a debt claim in civil proceedings
- Using the commercial rent arrears recovery power (CRAR) and the protected debt is to be disregarded when calculating the net unpaid rent for CRAR
- Give notice of enforcement concerning the protected debt
- Enforcing a right of re-entry or forfeiture
- Using a tenant’s deposit
Arbitration is not an option if the tenant is subject to a company voluntary arrangement, an individual voluntary arrangement or a compromise or arrangement which relates to any protected rent debt that has been approved under a number of Acts.