Post Covid – Moratorium on Commercial Landlord Remedies – Forfeiture and CRAR – Update
It has been just over two years since the start of the moratorium on commercial landlord remedies which affected CRAR (commercial rent arrears recovery) and forfeiture of leases. This was introduced to take account of the impact of the Covid pandemic on businesses. This has now (from 24 March 2022) been updated and largely lifted. So, on the face of it many landlords who have rent arrears or need to retake possession of their properties will certainly find this to be a relief.
However, the Commercial Rent (Coronavirus) Act means that if rent arrears fall under the criteria for “protected rent arrears” then there will be an ongoing impact on both CRAR and forfeiture.
Rent arrears will fall under the “protected rent arrears” criteria where a business was adversely affected by Coronavirus and where the rent in issue related to a period during the “relevant period” which began 21st March 2020 to 18th July 2021 (in England).
If arrears fall under the criteria for “protected rent arrears”, then the only option to landlords and tenants would be arbitration using a government approved legally binding arbitration process if agreement cannot be reached. There is an emphasis on the parties reaching agreement using the Government approved Code of Practice to facilitate this.
During the period which begins the day the Act was passed and ends either when arbitration has concluded or when the six months arbitration application period has passed, the landlord is prohibited from using the following remedies:
- Making a debt claim in civil proceedings
- Using the commercial rent arrears recovery power (CRAR) and the protected debt is to be disregarded when calculating the net unpaid rent for CRAR
- Giving notice of enforcement in relation to the protected debt
- Enforcing a right of re-entry or forfeiture
- Using a tenant’s deposit
So, we have not yet returned to the pre-Covid position although as time goes by fewer tenants will have the benefit of these protections. It is preferable in many cases for landlords and tenants to reach agreement on historic arrears and move forward. Having said this, where the arbitration process is called on, and if shown to work effectively, in the future this may be seen as a better means of resolving issues relating to rent arrears. A specialist arbitration process may well develop in relation to rent and operate in tandem with CRAR.