Coronavirus and UK rent recovery

Article 16 March 2021 Experience: Real estate

Possession proceedings

Since 29 August 2020, the notice period landlords are required to give residential tenants with statutory protection before commencing possession proceedings has been extended. Generally, landlords cannot start possession proceedings against tenants unless they have given 6 months’ notice, with limited exceptions, such as where a tenant has accrued rent arrears to the value of over 6 months’ rent.

Having suspended almost all possession proceedings in March 2020, the courts began considering cases again on 21 September 2020. The courts are prioritising the most serious cases such as where there are allegations of fraud, or alleged arrears equal to at least 12 months’ rent.

However, tenants continue to be protected against eviction. The government announced in a press release on 10 March 2021 that this measure will be extended until at least 31 May 2021. This means that bailiffs will be prevented from serving eviction notices except in the most serious circumstances such as illegal occupation or anti-social behaviour.

Corporate insolvency

Statutory demands’ are sometimes used to exert pressure on tenants to pay outstanding liabilities. The failure to satisfy a demand enables a landlord to commence court proceedings to put the company into liquidation. The threat of liquidation is often sufficient to persuade the tenant to pay.

The Corporate Insolvency and Governance Act 2020 (‘CIGA 2020’) suspends the use of a statutory demand for this purpose. Proceedings to liquidate a company cannot be commenced for failure to satisfy a statutory demand served between 1 March 2020 and 31 March 2021.

In addition, a creditor can only commence or pursue proceedings before 31 March 2021 on the basis that a company cannot pay its debts as they fall due if they have reasonable grounds for believing that:

1.1 Coronavirus has not had a financial effect on the company; or
1.2 the company would have been unable to pay its debts even if Coronavirus had not had a financial effect on it.

In many cases, it will be difficult to establish that the company’s failure to pay its debts is not due to the pandemic, and so for practical purposes landlords will be unable to pursue proceedings until after 31 March 2021.

It remains to be seen whether these restrictions will be extended beyond 31 March 2021.