Coronavirus and the Law – Property and Insolvency Update

Partner Jeremy LawsFrom the outset of the Covid-19 pandemic in February 2020 we have published regular briefing notes and updates on key changes in the law relating to residential property, commercial property and businesses.

This article provides an update on the current position on property and insolvency, and highlights the changes in effect from 1 October 2021.

Residential Premises

There are slightly different rules for England and Wales – this note covers the position in England.

From 1 October 2021 notice periods in England revert to the pre-pandemic period.

 

Section 8

Section 8 notices are fault based notices to terminate assured tenancies. From 1 October 2021 the basic notice period will be 2 weeks. Other notice periods may apply depending on the ground the notice relies on. For notices served after 1 October there is a new prescribed form.

Section 21

Section 21 notices are no fault notices. From 1 October 2021 the minimum notice period will be 2 months. For notices served after 1 October there is a new prescribed form.

Other Matters

From 17 November 2020 until 31 May 2021 there were various regulations which curtailed the enforcement of possession orders in England. Enforcement was only permitted in a small number of limited circumstances. These restrictions ended on 31 May 2021 and were not extended. Since 1 June 2021 enforcement of possession orders has been possible, however the Ministry of Housing, Communities and Local Government has asked bailiffs not to carry out residential evictions in England if anyone living in the property has Covid-19 symptoms or is self-isolating.

Landlords who obtained a warrant or writ of possession but were unable to enforce it due to the above-mentioned restrictions can apply to the court to extend the warrant or writ of possession for a further 12 months.

Commercial Premises

The current restrictions have been extended until 25 March 2022.

The main restrictions are:

  1. Landlords are not entitled to re-enter premises of forfeit for non-payment of rent.
  2. Where proceedings have already commenced, the courts are compelled to specify a date on which possession must be given which is after 25 March 2022 (further extensions may apply).

The restrictions only apply to business tenancies, and so the following are not covered:-

  • Licences;
  • Tenancies at will;
  • Tenancies outside the Landlord and Tenant Act 1954.

The current restrictions on Commercial Rent Arrears Recovery (CRAR) will remain in place. The total number of days’ outstanding rent required for CRAR will remain at 554 days.

Provisions in the Coronavirus Act 2020 also affect the landlord’s ability to rely on the non-payment of rent in opposing the renewal of a business lease.

From 1 October 2021 to 31 March 2022 landlords will not be able to present winding up petitions against companies in respect of arrears of rent and other sums due under business tenancies. The exception to this rule is where it can be shown that the arrears accrued due to some reason other than the finical impact of coronavirus. This will be very difficult to show in practice.

The government has also announced it will introduce a binding arbitration scheme for rent arrears accrued as a result of the pandemic. Although full details of the scheme are yet to be published, a broad outline of how the scheme will operate is available on the government.co.uk website. The scheme will broadly operate as follows:-

  • The government plans to introduce legislation to ringfence rent debt for commercial tenants whose business has been affected by Covid-19 business closures.
  • The period of rent that will be ringfenced will be from March 2020 until the business closure restrictions for that sector have been removed. Thus, it will depend on which sector the tenant operates in, in any given case.
  • Ahead of the legislation, the government will publish core principles with the expectation that landlords and tenants will negotiate in line with these principles.
  • The arbitration scheme is to be used as a last resort where other methods of negotiating have been exhausted.
  • Landlords can charge interest on arrears incurred after the ring fenced period, subject to the terms of the lease.
  • Landlords can still forfeit for breach of other lease terms.
  • The decision of the arbitrator will be final and binding on tenants.

For Landlords there are some aspects of both the new legislation and existing law which are favourable:-

  • It will not be possible for a landlord to waive a right to forfeit by conduct whilst the restrictions on forfeiture are in place.
  • The restrictions do not prevent re-entry or forfeiture based on breaches of other covenants.
  • Debt claims can still be pursued.
  • Rent deposits can be drawn on.
  • Claims can be pursued against guarantors.

Company Law Matters

The restrictions introduced by the Corporate Insolvency and Governance Act 2020 (CIGA) on presenting winding up petitions against a company based on statutory demands will be replaced with more targeted restrictions from 1 October 2021 to 31 March 2022.

The original restrictions imposed by CIGA prevented creditors from:

  • presenting a winding up petition based on a statutory demand served between 1 March 2020 and 30 September 2021; and
  • presenting a winding up petition based on a company’s inability to pay debts, if the inability was caused or contributed to by the pandemic.

From 1 October 2021, the new restrictions will allow creditors to present a winding up petition based on a statutory demand or a company’s inability to pay its debts, provided that:-

  • the creditor has issued notice to the debtor company giving the debtor 21 days in which to propose repayment options; and
  • the debt(s) is in excess of £10,000.

This does not apply where the debt is commercial rent arrears.

 

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