statutory demands commercial landlords

Restrictions on serving statutory demands easing for commercial landlords

For many industries in the UK, it has been ‘business as usual’ following the easing of Covid restrictions. Of course most of the population are now happy to see their favourite establishments back open for business. However, questions remain on the minds of commercial tenants and landlords and the rental arrears that accrued during Covid-19. Commercial landlords have been prevented from serving statutory demands on their tenants for Covid-related rent arrears. On 1 October, the legislation changed the position slightly, giving commercial landlords the chance to recover arrears (other than rent).

Statutory demands

A statutory demand is a written demand for payment of a debt served on a person who owes another person money (a debtor). Historically, in order to issue a statutory demand, the debtor must owe the creditor £750 or over and it must be owing for more than three weeks. Failure to comply with the statutory demand puts the debtor at significant risk of the creditor issuing bankruptcy or winding-up proceedings.

Throughout the pandemic, the Government put restrictions on when a creditor could use a statutory demand against a debtor. On 1 October, the Government lifted these restrictions.

Winding-up petitions

If a debtor does not comply with a statutory demand, creditors ordinarily may have been eligible to issue winding-up proceedings against the debtor. Generally speaking, a winding-up petition is the procedure of putting a company into compulsory liquidation on the grounds that the company is unable to pay its debts.

The restrictions on commercial landlords serving statutory demands

Covid-19 has had a significant impact on many businesses and by extension, their ability to pay debts. As a result, the Government restricted landlords presenting winding-up petitions for commercial rent arrears built up during Covid-19. The Government have confirmed that this will continue until March 2022.

However, from 1 October 2021, more specific restrictions will come into force that provide commercial landlords the ability to recover payments from their tenants other than commercial rent.

What does this mean for landlords?

Crucially, the new legislation continues to restrict statutory demands or applications for winding-up petitions for non-payment of rent. However, it does provide that commercial landlords may be able to recover unpaid sums, other than commercial rent, from the commercial tenant. This could include unpaid service charges, maintenance costs or insurance for example. To be eligible for payment:

  • The tenant must owe the commercial landlord £10,000 or more. This figure must not include commercial rent arrears; and
  • The commercial landlord must be able to show that they have that they have requested payment proposals from the commercial tenant before seeking winding up action. The Government have advised that landlords should afford the tenant 21 days to respond to proposals before pursuing action.

What does this mean for tenants?

It is expected that, by increasing the threshold for a landlord to bring a winding up petition, the new legislation will help protect smaller businesses.

The Government has placed the onus on the parties to negotiate payment plans to remunerate landlords. The 21 day response deadline to payment proposals gives tenants sufficient time to review their cash flow and make sensible offers to their landlords to make payment. Commercial tenants with the means to pay, should make payment as soon practicable.

If you have any queries regarding commercial rent arrears, we can help. Contact our commercial property disputes team today on 0800 988 7756. In our free initial discussion we can explain how we can help and give you a realistic costs estimate.

if someone sues you

What to do if someone sues you

We often write about how to start different types of claims. But how about if you receive a letter before action, or are served with court papers? It can feel very stressful and sometimes overwhelming. In our experience, it is important to act quickly and to be organised. So, what should you do if someone sues you?

1. Instruct solicitors early

If you receive court papers, there is nothing to stop you acting for yourself. However, it is worth noting that the civil procedure process is a minefield of complex rules, procedures and strict time limits. Therefore, we always advise people to instruct solicitors early in the process.

As dispute resolution solicitors, we are experts in dealing with most types of claims. If you instruct a solicitor when you receive an initial letter threatening court action (often referred to as a letter before action), we may be able to prevent the potential claim going any further. We can review the potential claim against you and advise and assist you to potentially rebut the claim entirely or settle it early without incurring the costs of legal proceedings.

The second-best time to instruct solicitors is as soon as you receive the court papers. As dispute resolution experts, we will consider whether there have been any technical errors by the other party, and the next appropriate steps (and the time limits for these). We will advise you on the merits of the case against you and whether the claim is likely to succeed or not. From here, we can work out a strategy to get the best possible result for you.

For example

Despite paying legal fees, instructing a solicitor early if someone sues you can be great value for money. For example, we recently had a Client who had been representing themselves. They had been writing to the opposition’s solicitors for many years. This drove up the opponent’s legal fees, whilst our client took on all of the responsibility of defending the potential claim without legal advice. The client then instructed us. Upon reviewing their file, we found that, had our client obtained legal advice sooner, there had been opportunities for them to dismiss the case early on.

2. Documents

Solicitors can only advise you based on the information you provide. Therefore, it is imperative we obtain all documentation relating to the claim from the start. Tucked away in those piles of papers can often be your ‘golden ticket’. These documents may include pieces of correspondence, emails and screenshots. Or it could be previous Court orders and related documents.

These snippets of information help us understand the essence and chronology of your claim. It assists our understanding of the parties involved and allows us to provide a fuller, more robust response.

3. DO NOT do nothing…

If someone sues you, whether you decide to instruct solicitors or not, it is important that you do take some action. Failing to respond to a claim or other court papers can leave you open to a judgment or order against you, including the other side’s costs. You may also find yourself with no option to defend the claim at a later date.

If you receive a letter from someone who is considering bringing a claim against you (or indeed, from their solicitors), our dispute resolution team can assist. Call us on 0800 988 7756 for a free initial discussion and costs estimate.

commercial rent arrears recovery

Commercial rent arrears recovery: Reliefs continue until March 2022

At the time of writing, we are 18 months on from the World Health Organisation’s announcement of the global Pandemic. On 14 June 2021, the Government announced that it would be pushing back the lifting of all restrictions. This has brought about a flurry of related new legislation, extensions, reliefs and further pushbacks by the Government. Whilst many fixate on the prospect of the ‘freedom day’ proposed for 11 July, for commercial landlords and tenants there have been other major developments. The Government has announced an extension of the commercial eviction ban until 25 March 2022.

Eviction ban for commercial rent arrears

Earlier in the pandemic, the Government announced protections for commercial tenants in respect of any unpaid rent. Essentially, the Government banned landlords from evicting commercial tenants on grounds of rent arrears. This was originally due to end on 31 December 2020. This recent announcement will be the third time it has been extended. It is now due to end on 25 March 2022. However, one striking difference with this update is the introduction of a backstop. Now, if commercial negotiations between tenants and landlords are not successful, the parties must enter into compulsory binding arbitration.

Of course, many businesses remain shut, or heavily restricted, which adversely affects their income. It is therefore suspected that the recent decision to push back the date is a direct result of the announcement to delay lifting all restrictions. We understand that the Government does not intend to extend the ban again.

Commercial Rent Arrears Recovery (CRAR)

When lockdown first hit, the Government restricted landlords using Commercial Rent Arrears Recovery (CRAR) to recover unpaid rent. The Ministry of Justice confirmed in their recent announcement that they are also extending the restriction on the use of the CRAR process by landlords. The total number of days’ outstanding rent required for CRAR will remain at 554 days.

It is hoped that this measure will continue to provide protection to tenants of commercial leases who have accumulated rent arrears during the coronavirus period.

Despite the restrictions on the use of CRAR, the Government has restated the importance that commercial tenants pay rent. This would be ideally in accordance with their lease, or as otherwise agreed with their landlord.

We have seen legislation regarding commercial rent arrears changing quarterly since March 2020 and it can be difficult to keep up. As a result, it is important to seek specialist legal advice before taking any action (whether as a landlord or a tenant). Call our commercial property disputes team on 0800 988 7756 for a free initial discussion.