Commercial property landlords in the UK will no longer be able to take legal action against tenants who have not paid their rent due to the COVID-19 outbreak.
The temporary ban, issued by the government, will run until 30 June and is designed to protect UK businesses from aggressive rent collection during the shutdown.
A loophole in the government’s Coronavirus Act 2020 had enabled landlords to commence statutory demands and winding up petitions against tenants struggling with rent. The loophole made it possible for landlords to pursue a Commercial Rent Arrears Recovery (CRAR) process as an alternative to forfeiture.
A number of gym and health club operators had come under threat from CRARs, with David Lloyd Leisure and Pure Gym among those to have received threats of legal action from their landlords.
In David Lloyd’s case, the company appealed to the landlord of one of its sites to waive rental payments due on 25 March 2020 – and going forward for the immediate future – until the crisis eases and the government allows its clubs to re-open.
The request was refused immediately by the landlord and was instead met with the threat of legal action through the issuing of a statutory notice.
“To stop these unfair practices, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus,” the government said in a statement, revealing the new measures.
“This will help ensure these companies do not fall into deeper financial strain. The measures will be included in the Corporate Insolvency and Governance Bill, which we set out earlier this month.”
Business secretary Alok Sharma added: “In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.
“I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants. I’m taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the COVID-19 emergency continues.”
The move was welcomed by physical activity body ukactive, which had actively lobbied for the loophole to be closed.
“On 13 April, ukactive made an urgent call for the government to restrict tactics being adopted by landlords who are coercing gyms and leisure centres into paying rent that has been withheld as a result of COVID-19,” ukactive said in a statement.
“While some landlords have engaged constructively with tenants to find solutions that work for both parties, our evidence showed a growing number of cases where the reaction of landlords has been to instigate legal proceedings against operators when rent cannot be paid.”