Commercial rent arrears and premises recovery extension to 2022 – is there an alternative solution?

The government has announced an extension to the moratorium on commercial rent arrears and premises recovery until 25th March 2022 much to the detriment of commercial landlords.  The moratorium was put in place to help businesses in crisis during the pandemic, particularly the retail and hospitality sectors, but many commercial landlords are now owed significant sums in rent arrears but are prohibited from taking action to evict their commercial tenants.

Whilst we have to strike a balance between the tenants and the landlords, simply kicking the can down the road yet again is not solving the problem. If the parties cannot agree now, they will not agree in nine months when yet further arrears have accrued and more pain will be felt all round. At the end of the March 2022 period there is also the arbitration process which will force an arrangement.

I believe we already have the mechanisms in place to deal with this now and, with a bit of creativity, we can create a win win situation for everyone including the government. We have a specialist court – the Business and Property Court (BPC) – full of experienced judges who deal with business and property matters. They are quick, adaptive and business oriented. I believe we could take best practice from other areas to put a simple cost-effective mechanism together to force a resolution or solve the problem at least for the next 12 months.

One response may be to consider the intention to forfeit stating the rent arrears and period of the same being filed at the BPC by the landlord which has to be affixed to the premises and personally served on the tenant giving 14 days’ notice of intention on the part of the landlord? A reasonable fee could be paid by the landlord to the BPC to cover admin. The landlord would also have to file a certificate of personal service with the BPC. A response pack goes with the notice with details of the local BPC to the tenant.

The tenant’s response and all other papers are considered by a Judge who either dismisses the tenant’s position outright and gives permission to forfeit, dismisses the landlord’s notice of intention if the information provided by the tenant justifies that position, or issues directions with strict compliance timetables, setting out what is needed from each side.  This would include accounts from the tenant, rent statement, details of all government assistance received and how it has been spent, proposals from each side as to how the matter should be resolved going forward to deal with the arrears and list the matter for a hearing, with summaries from each side being produced in writing beforehand and strict limits on submissions.

Of course the judge could dismiss the landlord’s application as the parties have reached a compromise etc. The matter could then be sorted in a few months with either forfeiture, current rent plus set amount of arrears to be paid, full agreement/adjustment of lease terms. The outcome would, of course, be case and sector specific and flexible/creative enough to deal with the particular circumstances of any situation.

This would need further consideration and consultation but at least it moves matters forward for both parties and the concepts are already in existence and dealt with by the Courts daily.

Surely this has to be better than continually doing nothing? It should be simple and quick to put in place.

 

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Disclaimer: Nothing in the Legal Insights section and this blog is intended to provide legal or other professional advice and, if readers are interested, they should consider taking separate legal or other professional advice accordingly.

Mark Gardner

Specialist in Dispute Resolution & Commercial Litigation,
Insolvency & Corporate Recovery

E: [email protected]
T: +44 (0)845 257 9449