On 23 April 2020, the government announced that it will introduce further emergency measures to protect commercial tenants from winding-up proceedings and other enforcement action by landlords in addition to those already introduced by the Coronavirus Act 2020. These measures, which will be in force until 30 June 2020 (but could be extended) have mainly been brought in to protect the high street shops and other companies unable to pay debts as a result of COVID 19 from what the government would seem to class as “aggressive action” and “unfair practices”. (Rather harsh language to use in my view).
These restrictions are to include restrictions on the service of statutory demands on commercial tenants and on winding up orders being made. The measures say statutory demands and petitions “issued” to commercial tenants are to be “temporarily voided” where the non-payment and in turn inability to pay debts is because of COVID 19.
It is not clear how these restrictions will work however I suspect that “temporarily voided” means a statutory demand served after 1 March 2020 (see below) will not be able to form the basis of a winding up petition until at the earliest 30 June 2020. As to the “temporary voidance” of a petition we will have to see the draft legislation to see how these restrictions will work in more detail.
It would seem that the intention is to temporarily ban the use of statutory demands “made between” 1 March 2020 and 30 June 2020 and winding up petitions presented from 27 April through to 30 June; again only in cases that are related to COVID 19. The idea is that all winding up petitions must firstly be reviewed by the court to determine why the company cannot pay its debts before the petition is issued (not just heard). Potentially therefore this legislation could also cover non landlord creditors although the announcement is only in respect of landlords; however I suspect it would be difficult for a Judge looking at a number of petitions presented by landlords and non-landlords to not apply the same thought process – is this as a result of COVID 19? Further will the Judge necessarily be able to determine just from the petition itself that the inability to pay debts arises solely/partly as a result of COVID 19?
The Government is also laying secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using the Commercial Rent Arrears Recovery process (CRAR) unless they are owed 90 days of unpaid rent.
Landlords and tenants have been urged to work together by the government, and tenants urged to pay rent if they can afford to do so. What companies are going to have to remember is that all of this is merely a “suspension” of payment but ultimately the time will come when payment will have to be made.
If you have been served with a statutory demand or a winding up petition contact Leanne Schneider-Rose on 0121 698 2200; for issues in respect of the collection of rent arrears please contact us on 08081668827 for Birmingham or 08081668860 for Shirley.
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