COVID-19: Guide for Commercial Property Landlords.

March 26, 2020

Amongst a range of introduced measures to help businesses, the Government has also ordered a moratorium (temporary ban) on commercial landlord sanctions for 3 months, this includes forfeiture or CRAR (Commercial rent arrears recovery).

Forfeiture or re-entry is the landlord’s right to determine the lease in the following instances:

  • Where a tenant has breached any of their obligations under the lease.
  • In the occurrence of certain events specified in the lease, for example, if a tenant becomes insolvent.

CRAR is a forceful measure, used to recover rent arrears through the use of an enforcement agent. This agent is appointed by the Landlord and they will take control of a tenant’s goods and sell them in order to recover an equivalent value to the rent arrears.
With the Government introducing a range of measures to protect businesses and the wider economy, it does not come as a surprise that a moratorium on Landlords options to recover non-payment of rent has also been introduced. This does, however, present difficulties for Landlords who depend on rents for their own income.

Important to remember is that the rent (and any accrued interest) are still due. With Landlords, in principle, being able to take action once the moratorium has expired. To avoid immediate use of actions to do this, we do expect the Government to announce a transition period. If Landlords are allowed to use forfeit or CRAR immediately it could undermine the current restrictions.

Given that rents are due imminently, or the due date has passed, we have put together some steps for Landlords to take in order to create a rent agreement that works for both them and the tenant:

  • Put the agreement in writing, including any guarantor.
  • The agreement should clearly state that this is not a waiver of lease terms or any guarantee.
  • Clearly state what is being agreed and include any interest that will accrue on the instalments/deferred payments.
  • You will need to clearly outline the full sum will fail and if the tenant fails to keep the agreement, including accrued interest, you will be able to take measures to collect this after the moratorium. If this is not outlined clearly you may only be able to collect instalments that have fallen due.

For further information on managing your cash flow and other measures in place to help businesses, please click here to visit our COVID-19 Business Information Portal.

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