Commercial Rent Arrears Recovery (“CRAR”) and the impact of Coronavirus

Good news for commercial tenants, bad news for landlords.

On 9 March 2021, the Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) Regulations 2021 (SI 2021/283) were made. Resultantly, those regulations have extended the existing restrictions on forfeiture of business tenancies for non-payment of rent in England, and on the use of CRAR.

Working within the framework of the 2020 Coronavirus Act (“the Act”), CRAR still allows a landlord to collect overdue rent without the need for a court order, this only applies to a commercial tenancy, subject to a written lease. At present, CRAR may only be utilised as a means to recover rent and any interest and/or VAT payable under the terms of the lease.

The Act has however put a temporary stop to repossession by forfeiture and provides a moratorium on a landlord’s right of re-entry due to non-payment of rent. As such, whilst the Act allows collection of rent, it halts any right to enforcement by action or otherwise during the relevant period.

The relevant period began on 26^th March 2020 and was originally planned to end on 30^th June 2020. The relevant period has however been extended several times in England, most recently to 30^th June 2021.

The aforementioned regulations automatically extend the restrictions on the use of CRAR in regulation 52(3) of the Taking Control of Goods Regulations 2013.

• From 25^th June 2020, landlords were able to issue petitions and take control of goods for any debts pre-lockdown, providing that the enforcement notice was served;
• Landlords are currently unable to forfeit, serve petitions or statutory demands if the company has been forced to close due to the pandemic. This remains in place until 30th June 2021;
• The regulations increase the minimum amount of net unpaid rent that must be outstanding before CRAR may take place during the relevant period to an amount equivalent to:
  • 457 days’ rent from 25 March until 23 June 2021 (inclusive).
  • 554 days’ rent from 24 June until the end of the Relevant Period.
• The current CRAR moratorium ends after 90 days of non-payment of commercial rent, unless no notice has been given. This means at the next rent quarter day, landlords are able to re-start taking action against commercial tenants for non-payments in the March quarter as long as a notice has already been served.
• Legislation is to be introduced that will increase the minimum net unpaid rent that must be outstanding before CRAR can be used.