Dealing with Landlords in the present COVID-19 crisis

Landlord’s Remedies

The Landlord has a number of different remedies available.  It is our strong advice that a collaborative approach is made to the landlord or the landlord’s agent, involving your solicitor at an early stage, to seek to resolve issues before they progress too far.

The landlord’s remedies are as follows: –

1. Court Action

This is the least damaging method from the Tenant’s point of view but one which the landlord is not likely to pursue.  By this I mean that the landlord would apply to the Court and get a Money Judgment against the tenant which it might enforce immediately or in due course.  The landlord however is unlikely to follow this course of action if it wishes to preserve goodwill with the tenant and maintain a future relationship.

2. Commercial Rent Arrears Recovery (CRAR)

This remedy available to the landlord consists of seizing the tenant’s goods and selling them.  It is however only capable of being exercised in respect of commercial premises i.e. not mixed-use premises.  It only applies to rent and not to insurance or service charge liability.  The procedure has some quite strict conditions which need to be fulfilled: –

• the rent arrears must be certain or capable of being calculated
• the tenant must be in arrears of rent before notice of enforcement is given
• the net unpaid rent equals or exceeds a minimum amount which is currently equal to seven days’ rent
• the tenant must be in arrears of the net unpaid rent when control of the tenant’s goods is taken.

The procedure requires an Enforcement Notice to be served allowing at least seven days’ notice before the right is exercised.  The tenant has a seven-day period to apply to the Court to enable the Enforcement Notice to be suspended.

3. Forfeiture of the Lease

This is the process whereby the Lease is brought to an end but the tenant may have two possible ways of improving its position, namely if the landlord has prior to the forfeiture waived its rights or in any event there is a statutory procedure to apply to the Court for relief from forfeiture which is often granted on terms that the tenant clears the arrears or otherwise makes a satisfactory arrangement.

4. Statutory Demand/Liquidation

This of course is a rather final and drastic remedy both from the landlord’s point of view and from the tenant’s point of view.  We are able to advise clients as to how to respond to this situation.

5. Authorised Guarantee Agreement (AGA)

There is a potential risk to you if you have previously transferred the Lease to another person and that you may have guaranteed that person under the terms of an AGA.

6. Rent Deposit

The landlord may well utilise your rent deposit, but most Rent Deposit Deeds require the amount utilised to be replaced within a very short period of time.

Tenants’ Response and Available Remedies

1. Force Majeure

The tenant may seek to argue that the Lease has been overtaken by unforeseen possibilities i.e. the COVID-19 virus outside the control of both the landlord and the tenant.

2. Frustration

The Lease itself is of course a Contract and it is possible that the tenant may seek to argue that the entire Contract has been frustrated by the unforeseen pandemic.

Both of these remedies are seen as speculative but may possibly win the Courts’ sympathy and may at least gain time.

3. Rent Holiday

The tenant and the landlord may enter into a binding Agreement either to suspend the rent, or to pay half-rent, or to pay for example monthly rent.

4. Insurance

It is worthwhile checking your insurance policy to see whether or not this particular risk is covered.

5. COVID-19 Legislation

The Government has directed that landlords should not seek to evict tenants in the immediate climate.  Further details can be obtained from the Government’s website.

6. The CRAR Remedy

The CRAR remedy only applies to “net unpaid rent”.  If therefore the tenant can successfully make a payment to the landlord bringing it below seven days’ rent then that remedy is not immediately available but of course may occur in due course if the arrears continue and if nothing else it may gain time for the tenant.

7. Payment Agreement

Payment Agreement – as mentioned previously the landlord and tenant may enter into a Binding Agreement for payment e.g. by instalment or after a specified period of time has elapsed, to enable the tenant to restart normal business activity and find the available funds to cover the rent arrears.