Government is taking further action to protect UK high streets

The Government has announced new measures that will offer further support to high streets. These measures are designed to address issues between landlords and tenants and follow legislation earlier in the crisis that introduced a temporary moratorium on commercial forfeitures due to non-payment of rent.

The moratorium on forfeitures was to support tenants unable to pay rent but not introduced as a rental holiday. Businesses that are still able to pay rent are expected to do so. Many landlords are working closely with tenants to find an approach that works for both parties. However, it is apparent that some businesses are being subject to aggressive debt recovery actions, including statutory demands, winding up petitions, and commercial rent arrears recovery (CRAR). These forms of debt recovery risk the closure of viable businesses and circumvent the policy intention of the moratorium on forfeiture in the Coronavirus Act 2020. They could also have a significant impact on high streets post the crisis. Government has therefore announced further action that is summarised below but also available here.


Statutory Demands

Government intends to legislate so that statutory demands served between 1 March and 30 June (with an option for extension) are made void, unless a winding up petition was already issued before the policy was announced. This measure will provide retrospective protection to tenants who were served demands in the context of the Covid-19 emergency. 


Winding Up Petitions 

Government intends to legislate to prevent creditors petitioning for a company to be wound up on the grounds that it cannot pay its debts, unless the court permits and is satisfied that the inability to pay debts is not as a result of Covid-19. This will have effect from 27 April until 30 June (with an option for extension) in line with other measures. If a winding-up petition is placed between 27 April and the point that this new law comes into force, the court will apply the test after the fact. This may mean the petition and any winding-up order based on it will be overturned, in which case the court will have the power to order the creditor who presented the petition to pay to restore the company to the position that it was in beforehand.


Commercial Rent Arrears Recovery 

Government will prevent landlords using CRAR to collect unpaid rent. This will be achieved by increasing the amount of rent due before CRAR can be used from the equivalent of seven days’ rent to 90 days’. This will be time-limited to align with the existing moratorium on forfeiture of leases in place until 30 June (with an option for extension). This measure was included in secondary legislation laid on 24 April by the Ministry of Justice. 

 

Supporting landlords

Government has also committed to closely monitor the impact of the moratorium on the financial health of landlords in advance of it ending in June; ensuring existing business support programmes are adequate to support the sector; and to working with stakeholders to agree best practice for landlords and lenders during this period.

The Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulatory Authority have issued a joint statement encouraging lenders and other parties to consider the issues arising directly from the Covid-19 pandemic when responding to potential breaches of covenants:

This will add to existing initiatives to support the UK’s businesses and commercial real estate sector through the crisis, which include the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Coronavirus Corporate Financing Facility - support which is available to both tenants and landlords.