Landlord & Tenant Update on Possession Proceedings and Rent Arrears Recovery
September 3, 2020
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Landlords will have noted with great disappointment the Government’s decision to extend the general stay on possession proceedings and enforcement of them until 20 September 2020.
The Civil Procedure (Amendment No. 5) (Coronavirus) Rules 2020 were laid before Parliament on 20 August 2020 and came into force from 22 August 2020. The Rules make a further amendment to CPR 55.29 (1) and state all possession proceedings brought under CPR55 and all enforcement proceedings by way of a writ or warrant of possession will be subject to a further stay until 20 September 2020.
This applies to all proceedings that were already stayed prior to these rules coming in force and all proceedings that are then going to be brought between 22 August 2020 and 20 September 2020.
Landlords will recall that in July the Civil Procedure (Amendment No. 4) (Coronavirus Rules 2020) came into force and dealt with the plans to deal with the slow resumption of claims. New Practice Direction 55C was put in place to deal with how claims, including appeals, were to proceed when the stay came to an end. However, in response to mounting political pressure, the government have decided to push back the stay again, only increasing the backlog of cases and levels of arrears needing to be recovered. Sadly, little thought appears to have been given to Landlords who are suffering a complete loss of income, many with no prospect of recovery, in the meantime. We are also seeing the same landlords come under increasing pressure from Lenders to meet their own obligations.
Some Courts are already issuing orders that stay cases until 30 October 2020, taking stays even further than the current deadline. Unfortunately, there is also a high possibility that there will be further extensions yet to come.
Where does this leave Landlords?
If you are a Landlord of residential property, you will require an order from the Court in order to obtain possession of a property being occupied as a residence. There is little hope of obtaining one in the imminent future. As such, other alternatives need to be considered for dealing with tenants. The most obvious option is to open a dialogue with your tenant, which you should be doing in any case, to see whether a resolution can be reached.
The option to bring debt proceedings for rent arrears where you are dealing with a tenant who does not want to pay, rather than one who simply cannot, does remain open. In such cases, it is now possible to undertake enforcement proceedings via bailiffs again to recover funds.
In the case of Commercial Property, there remains reserved in many commercial leases a right to recover the property by re-entry. However, commercial landlords should bear in mind Section 82 of the Coronavirus Act, which prevents them from taking such action until after 30 September 2020. At present, there does not appear to be any intention to extend that deadline but, as it approaches, there may be changes depending upon the political pressures exerted at the time similar to those that we have now seen in respect of possession proceedings.
The Corporate Insolvency & Governance Act 2020 came into force in June and has meant that threatening insolvency against a tenant has now become increasingly complicated. Up until 30 September 2020 when issuing statutory demands, any statutory demand issued between 1 March 2020 and 30 September 2020 will be considered void. Similarly, any winding up petitions presented up to 30 September 2020 will only be accepted if a creditor is certain that the issues faced by the tenant company are not as a result of the Coronavirus Pandemic. The Act also introduced a moratorium to assist businesses that were viable by giving them some time to recover and a new restructuring regime to assist companies in restructuring their debts. The practical implication of this Act for landlords is that issuing of Statutory Demands or pursuing tenants through the insolvency route for non-payment is no longer an attractive option for most landlords.
It is now possible for Commercial Rent Arrears Recovery to be engaged again. However, there are restrictions as to when this can be used and the process itself often means there is little prospect of practical recovery.
For the reasons set out above, this unfortunately leaves Landlords in a very difficult situation and having to think far more creatively about the specific facts of the circumstances surrounding the particular tenant and the arrears that have accrued or continue to accrue in order to forge a way forward.
It is worth noting that forfeiture for breached unrelated to rent arrears is still caught by the general stay on possession claims. However, we have had some success in making applications for prohibitory or mandatory injunctions in order to address those issues. Whether this remedy is available would depend on the specific circumstances of the breach. In residential property, a possession order will still be required in order to enforce the eviction of a tenant. However, an injunction may bring matters to a head and may mean that a tenant who is proving difficult is persuaded to move on or enter into an agreement. In respect of commercial property, there are self-help remedies available in many Leases in respect of disrepair that can still be exercised.
We appreciate these are challenging times for both Tenants and Landlords. If you would like further information about how we might be able to support you please contact firstname.lastname@example.org.