As industries prepares to return to normality, what does this mean in practice for landlords and tenants?
Today marks the end of the forfeiture moratorium which previously restricted a landlord’s ability to forfeit leases for non-payment of rent. The restrictions introduced 2 years ago were one of many measures protecting the economy and, in particular, tenants of business leases from the devastating impact of the COVID-19 pandemic.
From 26 March 2022, landlords will once again be able to forfeit leases for ‘non protected’ rent arrears.
The Commercial Rent (Coronavirus) Act 2022 introduces a means to resolve disputes between landlords and tenants through a compulsory arbitration scheme for ‘protected rent debt’. The Act is designed to ringfence and resolve certain pandemic arrears and:
- applies where the tenant was subject to compulsory closure; and
- relates to arrears accrued during the protected period which broadly covers the period 21 March 2020 to 18 July 2021.
A number of leases will fall outside the scope of the scheme and therefore landlords will need to consider whether the arrears are caught by the Act before taking further action.
Landlords will also need to ensure that they do not waive the right to forfeit by accepting rent. If a landlord accepts the March quarter’s rent after 25 March 2022 the right to forfeit for historic arrears may be waived.
Landlords who had agreed a reduced rent for the period of the Coronavirus Act 2020 should consider whether to accept payment after 25 March 2022. While landlords may be able to accept part of the March quarter’s rent and retain the right to forfeit in relation to the remaining balance, they will be waiving the right to forfeit for the earlier arrears. Note the right of re-entry will still be outstanding, so landlords may forfeit the unpaid balance in the future.
Landlords can accept payment in respect of historic arrears without waiving the right to forfeit in respect of future rents; satisfaction of outstanding debts will not mean a landlord is treating a lease as continuing. That said, acceptance of payment of historic arrears will waive the right to re-enter in relation to breaches of covenants for the period concerned.
The restrictions on presenting winding-up petitions will also be lifted on 31 March 2022, giving landlords further options when seeking to enforce arrears.