The temporary ban on the use of statutory demands and winding up petitions (introduced by the Corporate Insolvency and Governance Act 2020 ("CIGA")) as a method of obtaining rent arrears against commercial tenants and businesses was due to expire on 30 September 2020. This has now been further extended to apply until 31 December 2020.
Statutory demands may still be served, but they cannot form the basis of a winding-up petition.
A winding-up petition may be presented in situations where it can be established that Covid-19 has not had a financial impact on the tenant or, that the tenant would be unable to pay its debts regardless of Covid-19.
The CIGA act does not apply to individuals. This means where a tenant is a named individual, enforcement via a statutory demand and subsequent bankruptcy petition is still available.
Court proceedings remain a method of recovering arrears. A downside to Court proceedings is that they can be protracted and costly. Often, cases will not proceed to trial; and it is possible to bring about a resolution at a simple hearing shortly after issuing proceedings.
This is done by way of an application for summary judgment (and/or strike out application). A court may award a summary judgment if the Defendant has no real prospects of successfully defending the claim and/or strike out of any Defence where the Defendant discloses no reasonable grounds of defending the claim. Typically, where there is a lease in existence proving a tenant has an obligation to pay the rent is enough evidence for a summary judgment.
For any Landlords not wanting to pursue the above options, and are unable to find a resolution, it may be a case of waiting to see what the Government’s proposals are in the New Year and whether their right to forfeit for non-payment of rent will be reinstated.