This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Freshfields Transactions

| 3 minutes read

UK government extends support to stop business evictions for the rest of this year

At the start of the national lockdown brought on by the COVID-19 pandemic, the UK government introduced some unprecedented measures to protect commercial tenants.

Passed by Parliament on the 25 March 2020 – a few days after the country went into lockdown – these measures were originally intended to protect businesses that were prevented from trading by the lockdown from eviction by their landlords. Although all sectors were hit by the lockdown, the retail and hospitality industries were affected particularly badly, being, in most instances, unable to carry on any business in the early stages.

Section 82 of the Coronavirus Act 2020 prevented landlords from either beginning proceedings for rent arrears, or peaceably re-entering the premises during 'the relevant period' – that period being from 26 March 2020 to 30 June 2020. There was no requirement for the tenant to demonstrate that its non-payment of rent during this period was a result of the impact of COVID-19. Though these measures provided an essential lifeline to most businesses, the property press picked up on instances where tenants could afford to pay but chose not to.

The original suspension period protected tenants who had defaulted on rent obligations on the March quarter day, albeit that lockdown in the UK had only commenced a few days earlier. Unsurprisingly, landlords reported low rates of rental recovery from some sectors – with retail and hospitality being the most seriously impacted.

The Corporate Insolvency and Governance Act 2020 (CIGA), which came into force on 25 June 2020), went further and imposed a blanket ban on statutory demands being used for presenting winding-up petitions. On winding-up petitions, CIGA has taken a more nuanced approach. A creditor may still issue a winding-up petition, but the debtor’s default must not be as a result of the pandemic – and the creditor has to produce a statement to this effect. 

Additionally, pre-COVID-19, where a tenant had been in seven days’ arrears (in aggregate), the landlord had a statutory right to instruct an enforcement agent to take control of a tenant’s goods and sell them in order to recover an equivalent value to the rent arrears ('CRAR rights'). In an effort to give tenants more breathing space during lockdown, the government initially amended the relevant regulations – by increasing the minimum amount of net unpaid rent to 90 days. It was provisionally put in place to align with the Coronavirus Act 2020 with an end date being 30 June 2020.

The legislation was extended, so that the last date of 'the relevant period' became 30 September 2020 – the day after the September quarter day. The regulations in relation to CRAR rights were amended, so that the minimum amount of net unpaid rent became 189 days’ unpaid rent in aggregate for the relevant period.

Over the summer, there were many high-profile CVAs among retail tenants – of which New Look has been the most recent. The New Look CVA gave 68 of its 400-plus stores a rent holiday for three years, and on remaining stores it is reported that rents will be reduced to between two per cent and 12 per cent of sales on 402 of its shops. This was grudgingly voted through (even by some of the most powerful landlord property groups). The CVA has drawn sharp criticism from the British Property Federation and the property press. Disgruntled landlords continue to deride what they perceive as opportunism from tenants to get out of contractually agreed – and supposedly binding – lease terms under the pandemic guise.

Against this backdrop, Robert Jenrick, the Secretary of State for Housing, Communities and Local Government issued a statement confirming that the prohibition on eviction of commercial tenants for rent default and on the use of CRAR rights will continue until 31 December 2020. The ban on COVID-19-related winding-up petitions and the serving of statutory demands for non-payment of rent has also been extended to the end of the year.

In his announcement, Mr Jenrick said that 'this extension will help provide businesses and employees with certainty and protect vital jobs, particularly in the retail and hospitality sectors'.

The extension to the end of the year, encompasses the fourth quarter date, which falls on Christmas Day. With the Prime Minister’s promise 'to save Christmas' for the nation, beleaguered landlords are left hoping that Santa will bring them some cheer, perhaps in the form of restoring their common-law remedies. 


europe, real estate