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Increased Protection for Commercial Tenants during the Coronavirus Pandemic

Posted by Joshua Atkinson on 5th May 2020

In addition to the measures announced in the Coronavirus Act 2020, to protect commercial tenants, the Government has announced further plans to allow for even greater safeguards.

Under the Corporate Insolvency and Governance Bill 2020, it is proposed that a commercial tenant will be temporarily protected from:

  • the issue of statutory demands;
  • the issue of winding-up petitions; and
  • the making of winding-up orders.

Only if the debtor tenant is unable to pay its debts (e.g. rent owing) due to the coronavirus pandemic.

It is not certain how this will work in practice, but the essence is that any statutory demand or winding-up petition issued will be temporarily frozen if the tenant cannot pay its creditors due to the negative financial implications of the pandemic.

The Bill, although very close, is yet to come into force. In the absence of draft wording, legal commentators believe that statutory demands issued between 1st March 2020 and 30th June 2020 will be temporarily voided.

Equally, it is believed that winding-up petitions presented between 27th April 2020 and 30th June 2020 will be subject to the Court’s review to determine whether the company’s inability to pay is the result of COVID-19, before being issued.

In conjunction with the earlier rent and forfeiture protections, commercial tenants now find themselves substantially safeguarded until 30th June 2020, when these protections are subject to review (and possible extension).

The government’s overriding message is that landlords and tenants should work cooperatively and communicate throughout these challenging times. However, if you are a commercial tenant concerned about your ability to maintain your rent payments and ongoing financial obligations or a landlord with struggling tenants, please contact either Alex Smith or Amy Rose at Endeavour Partnership for advice on your legal position.

For further commercial property advice, find our full article on the emergency legislation put in place to offer protection for business tenants during the Coronavirus outbreak here.

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