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Recovery of rent and forfeiture in commercial leases

Recovery of rent and forfeiture in commercial leases
Recovery of rent and forfeiture in commercial leases

It is well known that the pandemic has had a serious impact on landlords and tenants alike, in particular with regard to the commercial sphere. Following the introduction of various COVID-19 related legislation, landlords have been restricted in their ability to seek enforcement of commercial leases and to recover rent. One of the principal areas of concern is what will happen to the arrears which have accrued when these restrictions are eventually lifted.

The current legislation pertaining to this issue includes the Coronavirus Act 2020 and the Corporate Insolvency and Governance Act 2020. A voluntary Code of Practice for Landlords and Tenants of Commercial Property across the UK was published in June 2020, quoting transparency and collaboration as its main focus.

The most recent change was announced on 16 June 2021 when the government made clear the current restrictions on lease enforcement and rent recovery processes. The route forward for moving out of the various moratoriums which have been imposed was also set out. The main take-home from this announcement was the proposed ring-fencing of arrears accrued during the pandemic, specifically the lockdown periods in which commercial tenants were forced to close their doors. Landlords may find it necessary, where possible, to turn to former tenants, guarantors or sub-tenants in order to address rent arrears.

With all of the changes that have been made it is clear that further legislation will be introduced in order to deal with the lifting of the restrictions which have been placed on landlords and their ability to enforce leases and recover rent. The proposals which have been announced to date will need clarification for both landlords and tenants to understand their rights and obligations in order to comply with the new procedures.

In the meantime, it remains a possibility that the restrictions on lease forfeiture, CRAR and statutory demands could be extended further.

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