Moratorium on CRAR, statutory demands and winding up orders

On 23rd April 2020, the Government announced that it is temporarily banning the use of statutory demands and winding up orders where the company cannot pay bills as a result of coronavirus.

The Business Secretary has made this move in response to some commercial landlords using “aggressive debt recovery tactics.” Whilst doing what they can to protect businesses and keep them afloat, the Government is also calling on those tenants to pay rent where they can.

Statutory demands and winding up orders

This moratorium will be covered in the Corporate Insolvency and Governance Bill. It will be in force until 30th June and can be extended, along with the other measures to protect tenants.

Any winding-up petition where the company is unable to pay because of COVID-19 may not be presented. Any petition that claims to not relate to COVID-19 will be first reviewed by the court.

This moratorium comes on top of the ban introduced in March 2020 on the eviction of commercial tenants for at least three months, which includes ending the tenancy by forfeiture of the lease.

Commercial rent arrears recovery (CRAR)

There will also be secondary legislation to prevent landlords from using CRAR (commercial rent arrears recovery) unless they are owed 189 days or more of unpaid rent.

Landlords should be able to access support from the Government, including through the recent expansion of the Coronavirus Business Interruption Loans Scheme and the Government says that it is working on their behalf with banks and investors.

Longer term planning

We have received many requests from property solicitors and landlords asking what they can do to recover arrears in the longer term. One alternative is to obtain a county court judgment (CCJ), as there are several advantages that the enforcement of a CCJ under a High Court writ of control have over CRAR:

• If the premises are closed, CRAR does not provide the right to force entry, whereas the writ of control does
• With CRAR, the enforcement agents may only attend the demised premises, whereas with a writ, they can enforce at other premises occupied by the tenant (as long as it is the same legal entity), for example, another branch or a warehouse
• Likewise, if there are insufficient goods at the demised premises, the enforcement agents may then visit a second address to make up the shortfall under a writ of control

This option may be worth considering as an alternative to CRAR; you can make the claim now, obtain judgment and writ and we can send the notice of enforcement. Then an enforcement visit could be undertaken once the lockdown has been eased.