The six-month window for referrals into the government’s Covid rent arrears arbitration scheme concluded on 24 September 2022, marking the end of the restrictions on landlords taking enforcement action.
The Commercial Rent (Coronavirus) Act 2022 introduced the arbitration scheme and restricted enforcement action including forfeiture, commercial rent arrears recovery and winding-up petitions, in respect of ring fenced arrears. Broadly speaking, ring fenced arrears were those arrears that accrued during a period when a tenant’s premises were subject to a Covid restriction or closure requirement.
The expiry of the restrictions is undoubtedly good news for landlords who now have the full arsenal of options available to tackle rent arrears regardless of the period that the arrears relate to, but there remain pitfalls for the unsuspecting.
Landlords thinking of forfeiting a lease must not forget about the risk of waiver. The lifting of restrictions means landlords must be careful that their conduct (or conduct on their behalf) in relation to previously ring fenced arrears is not regarded as waiving a right of re-entry or forfeiture for non-payment of rent.
Landlords have no doubt been cognisant of this risk in respect of non-ring fenced arrears since restrictions on forfeiture were lifted earlier this year, and must now extend such caution to previously ring fenced arrears.
Crucially, if a landlord is aware of a subsisting breach of a lease and wants to forfeit, then they must be careful not to do anything that acknowledges the continuing existence of the lease, for example by negotiating with their tenant. Landlords would be wise to take a cautious approach and stop all communications with their tenant prior to forfeiture.
We are often asked whether landlords can negotiate with their tenants on a without-prejudice basis without waiving the right to forfeit. While there is case law supporting this approach, it is dependent on the particular facts and circumstances, so landlords should tread carefully and seek legal advice.
For landlords who take care to avoid the pitfalls, Covid rent arrears that they may have all but written off are back on the table.
Chloe Meredith is a senior associate and Debbie Eliad is an associate at law firm Ashurst