When the pandemic initially gripped the UK, it is fair to say some commercial landlords were not as sympathetic as others. While the government was rushing to build emergency systems such as furlough to protect businesses and employees, there remained a real threat, that if action was not taken to prevent commercial evictions, those jobs would otherwise still be lost if the business had nowhere to trade.
Therefore, in an effort to protect viable businesses, the government announced a temporary moratorium, preventing commercial landlords from evicting tenants. As the pandemic continued to rage on, the moratorium continued to be extended. The government’s recent announcement this week has confirmed that the eviction ban has been extended again to 25 March 2022. It is anticipated this will be the final extension, subject to current Delta variant concerns.
Other protections were put in place to protect businesses, including the ban on presenting Winding Up Petitions from unsatisfied Statutory Demands, changes made to Commercial Rent Arrears Recovery (“CRAR”) and changes to the rules on Wrongful Trading to protect Directors.
However, there was never any ban or moratoriums put in place to prevent any creditors, including Commercial Landlords, from taking Court Action against debtors for unpaid debt, including rent arrears. Thousands of Court Actions continued throughout the pandemic and CCJs continued to be issued by the Court.
Fact check 1: “The main impact of a CCJ on a company is their credit rating and long-term credit worthiness”
Whilst this comment is factually correct, it applies an overly simplistic analysis of the impact of CCJs to businesses. A business’s ability to obtain credit, whether it be financing from banks or credit from suppliers, will be key to them being able to successfully re-open. Suppliers are more credit savvy than ever before and credit management companies allow suppliers to set up sophisticated monitoring systems of their customers. Where a CCJ appears, the supplier is automatically made aware and may take credit management steps with their customer, such as putting an automatic stop on their account, or they may re-assess any credit they are willing to give. Where businesses may not have the capital to pay for goods up front, having used what little capital they had to stay afloat, a CCJ may prevent a business from ever re-opening.
In addition, when the government’s bounce-back loan scheme was announced, there were many reports of businesses being turned down solely due to an unpaid CCJ on their records. Whilst the government has not indicated that there will be any further business support in the future, were that to change, a CCJ that a business has obtained post-Covid may prevent them being able to access those new schemes. In respect of the hospitality sector specifically, the government has already provided industry specific support.
Fact check 2: “CCJs cannot be collected or a ruling enforced against”
This quote from a representative of UK Hospitality, and published by the BBC, is wholly incorrect and any businesses reading it should be cautious. The government has never prevented creditors from enforcing CCJs during the pandemic. HCE Group, the largest High Court Enforcement Company in the country commented as follows:
“Despite the restrictions on commercial rent arrears recovery (CRAR) and the forfeiture of lease being extended until March 2022, enforcement under a High Court Writ remains unrestricted, with our Agents able to force entry to a commercial premises and take control of goods if the Debtor does not comply”.
In that regard, businesses and commercial tenants should be alive to the threat that despite the protections the government has put in place, landlords with valid CCJs (or any other creditor) can still instruct enforcement agents to enforce CCJs via a High Court Writ. Indeed, in many ways, a High Court Writ is preferable to CRAR.
In the case of Mr Fox, who the BBC interviewed, had the government not placed restrictions on CRAR, his landlord probably would have used that mechanism to pursue unpaid rent, which only allows agents to attend on the property the landlord leases to the tenant. Under a High Court Writ obtained after a CCJ is issued, an agent could attend on any of Mr Fox’s restaurants in Manchester and London, not simply the property with rent arrears.
Landlords may also employ other enforcement tools after obtaining a CCJ, such as freezing the tenant’s bank accounts or obtaining charges on any other property the tenant may own. Tenants should be extremely wary of any implication, that the protections the government has given them thus far prevent ongoing enforcement.
Fact Check 3: “CCJs have little real-world impact”
Put simply, this is not correct. CCJs have a very real impact, whereby they may prevent your business accessing immediate credit from banks and suppliers and leave businesses open to the threat of enforcement agents attending and taking goods. One CCJ can create a snow ball effect whereby other suppliers discover the CCJ, limit credit they have already provided and then start their own recovery action, on the basis that they are concerned your business is failing. CCJs are not technicalities for landlords or other creditors and should be taken seriously.
With the government’s announcement that a “binding” arbitration scheme is to be set up in the near future, and certainly before March 2022 to deal with Landlord/Tenant disputes over unpaid rent, tenants should brace themselves for a glut of action prior to the scheme being put in place. The British Property Federation was critical of the latest extension to the moratorium and the government schemes themselves are arguably pro-tenant. Landlords may not want to risk being bound in a government backed arbitration scheme, with an unknown remit and to which little information or guidance has yet to be provided. Instead, they may choose to rush through Court action.
William Watkins is a specialist in debt recovery and commercial litigation. He heads up the Debt Recovery team within our Dispute Resolution department at Harding Evans. If you need Debt Recovery advice get in touch on 01633 244233 or hello@hevans.com.
Read the BBC article here.
