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Landlords and tenants: new measures limiting enforcement

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Legislation has already been introduced preventing landlords from forfeiting leases due to non-payment of rent.

This is now to be followed by measures that will “temporarily void” statutory demands and winding up petitions that are issued against tenants where the non-payment is due to COVID-19.

These new measures will be included in the Corporate Insolvency and Governance Bill. The measures will be in force until 30 June 2020.

Legislation is also being enacted to prevent landlords from exercising Commercial Rent Arrears Recovery unless at least 90 days’ rent is owed.

For the vast majority of tenants who are struggling due to the current pandemic, this will be extremely welcome news. But there will be frustrations for some landlords who are faced with tenants who do have the ability to pay rent and who are simply choosing not to pay and to benefit from the protection afforded by this legislation.

So how does a landlord deal with a tenant that can pay but prefers not to pay?

In relation to the new legislation, it appears that if a landlord suspects that a tenant does have the cash to pay the rent and is free-loading through preference rather than commercial necessity, the onus will be on the landlord to satisfy the Court that the non-payment of rent is not due to cash flow issues resulting from COVID-19. That will require access to financial information that landlords will not have. The net result? Enforcement, at least until 30 June, is likely to be placed on the ‘pending’ pile. And that is precisely the purpose of these measures, to encourage landlords and tenants to work collaboratively through this crisis.

But it is also clear that unless further measures are introduced once we emerge from this pandemic, there is going to be a surge of forfeiture and enforcement action taken by landlords. Will this be a carefully managed process with due consideration given to the enormous strain that tenants have been under? Or will we see an environment akin to the Wild West, not quite lawless, but with simmering tensions erupting with brutal speed?

Andrew Turner is a Director in the Property Litigation Team at Hughes Paddison and can be contacted on 01242 586 841 or at aet@hughes-paddison.co.uk

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