Property litigation weekly update - 6 May 2021
In this week's bulletin, we discuss the options the Government is considering for post-30 June 2021 to deal with commercial property rent arrears and the new standard form - section 8 notice. Along with the usual good news stories and insights from across the firm.
Commercial property rent arrears: what will happen after 30 June 2021?
On 4 May 2021, the Government ended its consultation inviting views from landlords and tenants on the possible options for dealing with rent arrears once the existing prohibitions on forfeiture, CRAR proceedings and winding-up petitions end on 30 June 2021.
Although the voluntary Code of Practice provides guidance for landlords and tenants on how best to reach a negotiated agreement in relation to rent arrears that have built up as a result of the pandemic, the Government has made clear that rent continues to fall due (and recent cases affirm landlords' rights to pursue debt recovery actions at court). Many parties have been unable to reach agreement and will face a "cliff edge" if restrictions end without further measures in place.
The consultation, which opened on 6 April 2021, sought views on the following six options:
- Option one: allowing current protective measures to expire on 30 June 2021
- Option two: allowing the moratorium on commercial lease forfeiture to lapse on 30 June 2021 but retaining the insolvency measures and additional rent arrears amendments to CRAR for a period of time
- Option three: targeting existing measures to tenant businesses based on the impact that Covid-19 restrictions have had on their businesses for a limited period of time
- Option four: encouraging increased formal mediation between landlords and tenants
- Option five: non-binding adjudication between landlords and tenants
- Option six: binding non-judicial adjudication between landlords and tenants
The Government's call for evidence will support and inform its decision making on the best way to withdraw or replace the existing measures while preserving tenant businesses and jobs.
Although it is possible that the existing measures may still be extended, the Government has made it clear that the measures are temporary and cannot, and should not, continue indefinitely. However, the Government recognises that further legislation may be needed to deal with the position after 30 June 2021.
Landlords and tenants should continue to work towards a negotiated settlement. In the meantime, we await a further Government announcement on what will come next.
New Standard Form – Section 8 Notice
On 4 May 2021, a new standard form section 8 notice was introduced by the Assured Tenancies and Agricultural Occupancies (Forms) (Moratorium Debt) (Consequential Amendment) (England) Regulations 2021 (the Regulations). This applies to claims for residential possession claims brought under the Housing Act 1988.
While the new substituted form does not look much difference on first glance, the notes sections for both landlord and tenants have been updated to take into account the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the Breathing Space Regulations) which came into force in England and Wales on the same day.
The Breathing Space Regulations allow any person in debt to seek a debt moratorium from an approved debt advice provider. During the debt moratorium a landlord cannot legally pursue a tenant for arrears nor can it serve a section 8 notice for possession of a property on arrears grounds.
The Regulations though apply to England only and going forward a landlord looking to serve a section 8 notice will need to use the new form to avoid any questions of invalidity.
Insight from across the firm
- No jab, no job?
- Re-opening London: What part will the hospitality sector play?
- Local government reorganisation: bridging the divide
Good news stories
- India’s Richest Man Retools Factories to Provide FREE Oxygen to 1 in 10 COVID Patients Across Country - As India grapples with an unprecedented new wave of Covid-19, one of the country’s major companies is working round-the-clock to get free oxygen out to people in need. Traditionally, Reliance Industries is not a manufacturer of medical-grade liquid oxygen. But over a year into the pandemic, the company—which is owned by India’s richest man Mukesh Ambani—has gone on to become the nation’s largest producer from a single location, supplying over 55,000 MT of medical-grade liquid oxygen to people since March 2020.
- Scientists Make Micro plastics Breakthrough, Devising Method to Trap And Remove Them - Microbiologists have found a way to use bacteria to trap micro plastics, removing them from the environment and making them easier to recycle. The new technique, developed by scientists at Hong Kong Polytechnic University, uses bacterial biofilms—a sticky substance created by micro-organisms—to trap micro plastic particles. The biofilm is then processed and dispersed, releasing the micro plastic particles for processing and recycling.
- New malaria vaccine hailed as potential breakthrough – A malaria vaccine has proven 77% effective in early trials, and it could lead to a major breakthrough against the disease. According to the University of Oxford team behind the vaccine, it was deemed safe and showed “high-level efficacy” over 12 months of follow-up. As this is the first malaria vaccine to reach the World Health Organisation’s (WHO) goal of at least 75% efficacy, the team are hopeful it can be swiftly approved and build on Covid vaccination distribution methods and finally turn the tide in this battle.