Commercial real estate update: a final extension on the moratorium on lease forfeiture?

UPDATED June 2021 – Please click here to read the latest version of this article.

A quick recap

In March 2020 the UK Government imposed unprecedented restrictions in the face of the Covid-19 pandemic in relation to the forfeiture of commercial leases by enacting the Coronavirus Act 2020 and other business support measures. These introduced the following key restrictions on rent arrears recovery:

• A moratorium on rights of forfeiture by landlords against tenants for the non-payment of principal rent until 30 June 2020. This was subsequently extended to 30 September 2020, 31 December 2020 and then again until 31 March 2021. All rent arrears will remain due.
• Restrictions on the use of Commercial Rent Arrears Recovery (CRAR) by increasing the minimum arrears necessary from seven days principal rent to 90 days initially, 189 days from June 2020, 276 days from September 2020 and then extended to 366 days from 25 December 2020.
• The use of insolvency proceedings and statutory demands effectively suspended until 30 June 2020, extended to 30 September 2020, 31 December 2020 and again to 31 March 2021.

What is the effect of the Government announcement on 10 March 2021?

• The moratorium on commercial lease forfeiture for non-payment of rent is now further extended to 30 June 2021.
• CRAR can only be exercised when 457 days of principal rent are outstanding between 25 March 2021 and 23 June 2021 or 554 days principal rent outstanding between 24 June 2021 and 30 June 2021.
• No update yet on whether the current restrictions on the use of insolvency proceedings (namely, the use of statutory demands) will also be extended but a similar extension is expected.
• Actions against former tenants and guarantors can still however be pursued.
• Rent deposits can still be utilised.
• Debt claims for unpaid rent can still be pursued through the Courts.

What next?

The Government has now turned to the real estate industry to provide evidence on the progress of rent arrears negotiations between landlords and tenants to best inform the Government’s next steps.

The announcement issued by the Ministry of Housing, Communities and Local Government refers to a “phased withdrawal of current protections” and “legislative options” targeting the sectors most affected by Covid.  

A review of the Landlord and Tenant Act 1954 as well as different models of rent payment have also been suggested, which could mean changes that long outlast Covid.

Contact us

If you have any questions about these issues please get in touch with a member of the team or speak with your usual Fox Williams contact.