Property litigation weekly update – 2 July 2020
This week's update captures a number of the latest property-related measures seeking to respond to the economic impacts of lockdown and address the practicalities around premises reopening. The situation is evolving and we remain on hand to assist with property-related legal enquiries as these arise.
Extension of required period for Commercial Rent Arrears Recovery for commercial leases (CRAR)
CRAR is an enforcement method which allows landlords, using an enforcement agent, to seize a tenant's assets and sell them to recover arrears of pure rent (excluding service charge and insurance rent), subject to specific notices being served and notice periods being observed. On 24 June 2020, the government announced a temporary measure preventing the use of CRAR unless a minimum of 189 days of rent are owed (an increase on the previously temporary measure which set a minimum threshold of 90 days). The extension aims to provide further protection for commercial tenants and businesses in response to the Covid-19 pandemic.
The measures have been included in the Taking Control of Goods and Certification of Enforcement Agents (Amendment) (No. 2) (Coronavirus) Regulations 2020. The restriction currently applies until 30 September 2020 but could be extended further by the regulations. The current effect is that CRAR cannot be used where only two quarters' of rent are owed as the 189 day threshold will not be met. We may see tenants tactically paying down their arrears to below the level of the threshold in order to prevent CRAR from being used.
For further information and advice on CRAR or any other rent recovery assistance, please contact the property litigation team.
Corporate Insolvency and Governance Act 2020
Having had its first reading just over a month ago, The Corporate Insolvency and Governance Bill received Royal Assent on 26 June 2020. We reported on the provisions when the Bill was first issued.
In summary, the provisions of the Act provide for:
- A new moratorium giving companies breathing space from enforcement action;
- A new restructuring plan;
- Disapplication of termination / suspension clauses in supply contracts by reason of the company's insolvency where the supplies continue to be paid for;
- Temporary restrictions on statutory demands and winding up petitions which have arisen as a result of Covid 19;
- Temporary suspension of wrongful trading provisions contained in the Insolvency Act 1986.
The provisions of the Act commenced as of last Friday, save for the temporary business protections measures which have retrospective effect.
Hearings should continue to be conducted remotely wherever possible
Following the outbreak of the pandemic, the Civil Justice Council in England and Wales released protocol guidance requiring hearings to be conducted remotely "wherever possible". The objective being to minimise the transmission of Covid 19 and reduce the public health risk during the outbreak.
In the recent case of Surrey Heath Borough Council v Robb and others  EWHC 1650 (QB), the High Court heard an application made on behalf of the defendant requesting an interim hearing be heard physically in court, rather than by way of a remote hearing. The defendant's application was made on the basis that (1) they would not be able to follow the hearing without the guidance of their legal representatives, (2) the cross-examination of the claimant's witness would be more effective in the court room; and (3) as the injunction concerned the defendant's ability to reside on their own land, a remote hearing was "undesirable".
The High Court found that the defendant had provided no good reason for the hearing to be conducted at court; the defendant could make arrangements with its legal representatives elsewhere, there was no reason to make an order for cross-examination at this stage and, in any event, a previous hearing had been held remotely.
The High Court therefore refused the defendant's application and concluded that where justice can be obtained by way of a remote hearing, hearings should continue to be conducted remotely.
Rogue landlord receives banning order
The Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations came into force on 1 October 2018. The aim of the regulations is to give local authorities new powers to protect private tenants from rogue landlords. In April 2018, we saw the introduction of a database of rogue landlords and property agents who have been convicted of certain "banning order" offences.
In a case heard in May 2019 by Poole Magistrates' Court, Mahmut Gilgil was alleged to have breached fire safety regulations by failing to provide a fire safety detection and alarm system, failing to fix a fire resistant plasterboard and failing to replace existing doors with new 30 minute fire doors. Other breaches he was accused of included failing to provide a gas safety certificate, failing to clear vegetation from gutters and not replacing loose and missing roof tiles. He was found guilty and was fined a total of £3,000. He was also ordered to pay costs of £3,425 plus £30 surcharge to victim services.
Due to the severity of the offences, Poole Borough Council took the decision to file for a banning order in relation to Mr Gilgil so that he may not further manage or let properties. Mr Gilgil received this five year banning order which is effective from 3 June 2020.
Banning orders came into effect on 6 April 2018 and prohibit a person from renting out residential accommodation, engaging in letting agency work or engaging in property management work. Furthermore, a banning order also prohibits a person from holding an HMO Licence or a licence granted under a selective licensing scheme.
Given that Mr Gilgil was given such banning order, Poole Borough Council is also obliged to place him on its national database of rogue landlords and agents.
Additional £105 million for local authorities to support and accommodate the homeless during pandemic
In recognition that the homeless are particularly vulnerable during the Covid-19 outbreak, due to the higher likelihood of having underlying health conditions and also greater difficulties following advice on self-isolation, hygiene and social distancing, on 17 March 2020 the Government announced £3.2 million in emergency funding for local authorities to help rough sleepers.
By May 2020 nearly 15,000 people in England who were sleeping rough or at risk of sleeping rough had been provided with emergency accommodation. Also in May 2020 the Government said that a specialist taskforce was to develop plans to try and prevent as many of these people as possible returning to street homelessness.
The Government has announced on 24 June 2020 that a further £105 million will be made available for local authorities in England to enable them to continue their support and accommodation for the 15,000 homeless people accommodated during the pandemic. This funding is intended to help people secure their own tenancies as well as provide interim accommodation pending longer-term accommodation.
More generally the March 2020 budget had allocated £381 million for rough sleeping services over the next four years (£237 million for accommodation and £144 million for associated support services).On 24 May 2020 the Government announced that this would be increased to £433m, with £160 million brought forward to 2020/2021.
Government reduces planning and licensing rules to allow for outdoor trading
Ahead of the re-opening of many businesses including pubs and restaurants on 4th July or "super Saturday", as it is being dubbed, the Government has introduced significant changes to licensing and planning legislation in order to help licensed premises bounce-back. The temporary changes come under the new Business and Planning Bill 2020, enacted on 25 June 2020, and will allow pubs, restaurants and cafes to better serve customers outside including being able to use pavements, terraces and car parks as dining or drinking areas.
- Alcohol licensing changes allowing operators with existing licences in England and Wales to also serve alcohol for consumption off the premises and to make deliveries.
- A new "Pavement Licence" regime which includes a lower application fee and a reduced consultation period from 28 calendar days to five working days, granting consent after 10 working days if the council does not issue a decision.
- Outdoor markets, summer fairs and pop-up car boot sales can be held in England without planning permission.
Insight from our colleagues around the firm
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- Webinar – making the case for safety - the new Building a Safer Future regime
Good news stories
- Pride celebrated around the world in spite of Covid-19 – Pride month has been celebrated across the world in London, Taipei, Berlin and many more in spite of COVID-19. Many events went virtual, including Trowers' Global Pride event which included our Partner Pride makeover where Partners were chosen to dress up in up in glitter and glam to celebrate the Pride festivities in support of our chosen LGBTQ+ charities.
- Care home in Chigwell creates glass screen for visitors - A care home in Chigwell, UK has built a summerhouse with a glass screen and intercom to enable care home residents to have face-to-face visitors.
- 73-year-old runner completes 1,000 mile running challenge for local chemotherapy unit - Dic Evans from Ceredigon has run 1,011 miles beating his 1,000 mile target during lockdown to raise money for a local chemotherapy unit. Mr Evans has raised £6,000 so far for Bronglais Hospital.