1st April 2021 – Fools beware

The Coronavirus Act 2020 introduced protections for businesses suffering due to lock-down measures and changing circumstances. Landlords have been unable to adopt many usual measures for taking back possession and distraining goods – a Moratorium on enforcement. Commercial reality and supportive landlords have enabled many businesses to find settlements and compromise. This collaboration was specifically encouraged by the Government’s Code of Practice.

The Government has introduced two extensions on the original Moratorium. The latest period comes to an end on 31 March and this was described as a “Final Extension”. This currently means that numerous legal proceedings will commence and Bailiffs will be taking peaceable re-entry or serving CRAR notices on 1 April, where disputes are irreconcilable. The impact would be dramatic, causing irrefutable damage across numerous business sectors.

There has been little news on the issue in recent weeks and it is possible the “Final” extension may be repeated for another three months. There may then be instances where tenants have taken advantage of the Moratorium and failed to make any effort to meet their liabilities since the December 2019 quarter – so an extension in these circumstances would be unjust for these landlords, as they also have obligations.

At Day and Bell we believe a compromise is required on the restrictions.

• Where debts remain outstanding from March 2020, landlords should be entitled to take all available enforcement action – especially where tenants have benefitted from the grant regime and furlough payments. Maintaining the existing Moratorium would solely serve to exaggerate the underlying business failure and prevented landlords adopting any pro-active measures.
• If a business tenant has made significant steps in meeting their liability during the pandemic the Moratorium may need to be upheld to maintain employment and avoid a capitulation in some business sectors – especially hospitality and leisure – which have faced the brunt of restrictions.

Individual landlords may consider they could take their chances in re-letting a property, yet this gamble will have higher odds if numerous leases are terminated at the same time. The impact on the property market could then be catastrophic if restrictions are totally withdrawn.

We will leave the politicians to determine the balance that needs to be struck. Our clients, tenants and partners know that we favour successful collaboration.

POST SCRIPT
The Government has decided to extend the Moratorium on lease enforcement to 30 June 2021. This was surprising, yet Day and Bell is now working to use other methods to seek arrears recovery and forfeiture, with the help of specialist solicitors.