The Government announced yesterday that the ban on the eviction of commercial tenants will last until the end of March 2021.
The announcement follows a series of measures introduced by the Government to protect businesses from losing their commercial premises due to the impact of COVID-19
On the one hand, this must be right. Businesses must be given the breathing space to recover from a crisis which was not of their making, has come out of nowhere, and has decimated their trading. As a business ourselves involved in the collection of rent and other debts from all types of business we know only too well the hardship that can be caused by eviction in any setting. We don’t even like the word!
That said, in our business life, there are always three aspects of our operations. The situation of the debtor is one and we empathize with that as we are a business ourselves. Then there is our duty to the Court as High Court Enforcement Officers. We take this responsibility seriously and follow Government Regulations to ensure safe and proportionate enforcement. Thirdly there is the need to help and support our customers, who are the landlords who use the lawful and correct steps to protect their businesses from bad debt, and sometimes bad tenants.
In the current climate, we agree that businesses must be protected. Bigger interests are at play here. The protection of the economy follows closely behind the protection of public health and the Government has an unenviable task in trying to safeguard both aspects of our national life.
Landlords like other citizens must play their part in the protection of these interests and many are doing that at great cost to themselves. Whilst a mega-landlord such as an institution may well have the cash to ride out the storm, not all landlords are “Goliaths” of the business world. Many are small-time investors who rely on the commercial rent from property to finance a pension, or to top up other sources of income.
So, whilst the world of landlords looks gloomy, we think it important to highlight the options still available to landlords despite the announced extension. The law can be flexed to meet the needs of claimants as well as debtors. The way that a landlord recovered rent six months ago doesn’t work in today’s climate, so a change of approach and use of the law is needed until the well-trodden processes are back online.
So, what is available to landlords in both commercial and residential settings? Here are our top picks to get landlords through the current crisis |
1. MEDIATION | We have just set up a mediation service to support landlords and other claimants who need to resolve a dispute but who don’t want to encounter the risks of going to Court and incurring unknown legal fees, either with their own lawyers and or for the other side. Litigation as you know is a risky business! The Government itself supports and encourages the mediation process and we do as well. It is our natural fit in our group of solutions for cash flow and property and reduces the risk of enforcement and ultimately eviction. It won’t work for everyone but getting an agreement on how to move forward it going to be the best and most cost-effective way out of a situation where eviction is off the table – and in any event, eviction takes neither party forward in the current climate
2. GET A CCJ FOR THE MONEY OWED | Landlords seem to us to be very focused on using property-based solutions for their enforcement – be it the Commercial Rent Arrears Recovery (CRAR) process or Forfeiture. CRAR is definitely offline for the moment unless the rent is over 366 days old (from 25th December 2020) and for many commercial landlords, the rent will have been paid up until the December quarter day in 2019. So instead of doing nothing – we suggest issuing a money claim for the amount of the rent, and other sums due under the lease, and entering judgment for that amount. With a CCJ in place, a landlord has more “cards in the hand” to play.
A landlord might encourage the tenant to pay within the one month after judgment to avoid getting a CCJ registration for 6 years on the tenant’s credit file. Whilst it’s still tough on a tenant to be the target of a money claim, it’s not as tough as trying to evict a tenant or and in the future. If the moratorium is extended more claims can be issued. Judgments don’t have to be enforced for 6 years (without seeking further permission from the Court) and they mean a landlord has an option to enforce using all the usual enforcement remedies such as a Writ of Control, Charging Order, Third Party Debt Order, and even Attachment of Earnings (for directors on salaries in their tenant businesses). These measures are not banned under current Government guidelines and are the function of the civil court enforcement system. There can be no criticism against a landlord taking a route to achieve a judgment and then enforcing it – admittedly with flexibility and empathy for good tenants.
3. CHECK THE COMMERCIAL LEASE FOR OTHER OBLIGATIONS | We are seeing landlords still serving Section 146 Notices for breaches (other than rent) as they protect their position to remove tenants using Forfeiture clauses. No doubt some serious thinking has been done on the landlord side of the relationship to forfeit a commercial tenant before pushing that button. Good tenants and even tenants with an appetite to have a commercial lease are going to be harder to find in 2021 and beyond. What this pandemic has shown is that businesses can work in cheaper and less obvious locations. The need for commercial rental space is going to change. For the moment however forfeiture for breach of lease obligations not connected to non-payment of rent is a way for a landlord to bring a relationship to an end but the spectre of empty property looms so it is not without consequences.
4. TRANSFER JUDGMENTS AND ORDERS TO THE HIGH COURT | You could say we would say this – and you’d be right. We pioneered the transfer process for both Writs of Control and Writs of Possession, and we feel very confident in saying that both do an awful lot of good for landlords. Whilst the moratorium is in place, we encourage landlords to look at what rent and other charges they are owed and get themselves into a position of having a High Court Writ in place to enforce when needed.
For money judgments, this is relatively straight forward. Issue the claim, enter the judgment after 19 days and apply for the Certificate of Judgment on N293A so that a Writ of Control can be issued in the short, medium or longer term. Using the time to get into a stronger position.
For possession claims the moratorium provides the time to get possession claims issued with this suggested wording |
"AND the claimant intends to make an application for leave to have the matter transferred to the High Court pursuant to section 42 of the County Courts Act 1984 for enforcement"
For possession orders already made, and where landlords fear the inevitable delay caused by the backlog of thousands of possession claims, we encourage landlords to apply now for an order allowing for enforcement in the High Court. This in itself will take time, and must be supported by clear evidence of the adverse and severe impact on the landlord’s business of the government restrictions, but if successful it will enable a landlord to move the enforcement process to the High Court, where HCEOs and their enforcement agents are able to act within 14 days of a Notice of Eviction being served. A date for the eviction can be given and the landlord is not left waiting for an eviction appointment weeks ahead.
5. FORMER TENANT RENT ARREARS | If these were writt0en off in the past, or CCJs or Orders obtained which were not enforced, then we encourage landlords to dig them out of their filing systems and dust them down. The hard work has been done. If these old CCJs and Orders, were obtained within 6 years a Writ of Control can be issued, or some other form of enforcement action can be taken, without having to go back to Court for permission.
The remedies for landlords to recover their rent and their property have been severely curtailed until the spring. This means a year of living in a COVID world has taken its toll. BUT …. there are some remedies left meaning there are ways to protect a landlord’s position which work for both commercial and residential landlords. Not they are not as simple as a CRAR or a Forfeiture action. But with the right support landlords can help their businesses through the start of the New Year.
Shergroup offers a free review service of any judgment or order that a landlord would like us to check before taking action. We also offer a full claim to judgment service through our related legal brand. If you need support please contact us at www.shergroup.com or on any of our public-facing channels.