Top tips for commercial tenants in dealing with landlord claims for COVID-related rent arrears

The government’s moratorium on action against commercial tenants with rent arrears from the pandemic has ended and there is now no opportunity to refer rent arrears disputes to arbitration.

As a result, landlords are now able to take action for non-payment of rent, including the forfeiture of leases, debt claims at court, enforcement agents attending properties, and the service of Statutory Demands.

Without government restrictions, in addition to the cost of living crises and soaring energy bills, such claims are only likely to increase. This means that tenants need to act now to protect themselves.

How can commercial tenants protect themselves against claims from their landlords?

1. Pay current rents as they fall due each month/quarter

By ensuring your current rent is paid on time, this may protect against the landlord’s ability for forfeit for any existing COVID arrears. Some landlords may not have pursued Covid arrears for some time, but it is not safe to assume that the issue has gone away.

2. Seek a negotiated solution for COVID arrears

Whilst the safest way to avoid action may be to pay the arrears in full, there remains merit in seeking to reach a commercial settlement with your landlord.  To a landlord, being paid part of the arrears now is often preferred to engaging in lengthy, costly, and uncertain litigation.

3. Check previous communications

Did your landlord informally agree to a rent deduction/holiday/deferral which can now be referred to? This may fetter their ability to enforce.

4. Take action now

It’s important to ensure that you take advice from your solicitors and surveyors before any action is commenced, as you may be able to steer a path away from litigation.

5. Remember, tenants can still take action

If any action is taken by your landlord, you can still take action. For example, if your landlord forfeits the lease, you can apply to court for relief to get your lease reinstated. Take advice from your solicitors if your landlord forfeits by changing the locks or serving proceedings at court.

6. Look into if you can surrender your lease

Finally, if payment of current rent arrears on an ongoing basis is unlikely to be realistic, consider whether there is an opportunity to break or surrender your lease to stop further liabilities being incurred.