The measures were originally implemented to allow viable businesses affected by the pandemic restrictions protection from unnecessary insolvency proceedings. These will be lifted as trading conditions arising as a result of the pandemic are returning to normal.
The two key points of the new legislation, which will be in force until March 2022, are:
It will protect businesses from creditors demanding repayment of small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more;
It will require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with a winding-up action.
The new measures are being brought in to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up. This will particularly benefit high streets, and the hospitality and leisure sectors, which were hit hardest during the pandemic.
How does this affect me if I am a landlord?
As a landlord you will be keen to see your tenants paying their rent on time and you may feel this legislation prejudices you. Your main income may be commercial rent itself and these missed rent payments could be detrimental to your business. These existing restrictions will prevent you from instigating winding-up petitions against limited companies to repay rent arrears built up during the pandemic.
However, the government stresses that commercial tenants should pay their rent where they are able to do so and the government will be implementing a rent arbitration scheme which is set to deal with commercial rent debts accrued throughout the pandemic.
How does this affect me if I am a tenant?
As a tenant you should pay your contractual rent when you can. However, the restrictions already in place will continue to remain and therefore you will be protected from winding-up petitions provided your debt doesn’t exceed the £10,000 threshold. This supports the promise made on June 16 that tenants will be continued to be protected from eviction until March 31, 2022. The proposed rent arbitration scheme should also assist in relation to accrued rent debts.
How can we help?
If the rent has accumulated before March 2020 then you will be able to take steps to recover it and this is something Wilson Browne Solicitors are happy to advise on. The team can also advise on the serving of a statutory demand, for debts of up to £750 (company) and £5,000 (individuals). Essentially, this is a tool to scare a debtor into paying up. However, it should be noted that you cannot proceed to serve a winding-up petition following the statutory demand due to the current legislation as discussed.
Another solution the Commercial Property team can provide guidance on is the Commercial Rent Arrears Recovery (CRAR) Scheme. This is a self-help scheme whereby a landlord can instruct enforcement agents to collect rent or take control of goods. The current legislation has altered this, as in the past the rent must have been overdue by a minimum of seven days’ worth of rent – now it must be at least or equal to 90 days.
For advice, contact Wilson Browne Solicitors on 0800 088 6004 or visit www.wilsonbrowne.co.uk
Tom Charteress Commercial Property Paralegal
Wilson Browne Solicitors