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On Thursday 23rd April, the UK Government announced their plans to bring forward emergency insolvency legislation. Commercial property landlords have now been temporarily banned from issuing statutory demands and winding up petitions to businesses struggling due to the coronavirus.
The Government press release stated:
“High street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic, the Business Secretary has set out today (23 April 2020).
The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics.
To stop these unfair practices, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. This will help ensure these companies do not fall into deeper financial strain. The measures will be included in the Corporate Insolvency and Governance Bill, which the Business Secretary Alok Sharma set out earlier this month.”
Whilst this is welcomed by businesses who are struggling during this pandemic, a recent High Court judgment is a stark reminder that this only applies to businesses struggling as a direct result of the coronavirus.
In Shorts Gardens LLB v London Borough of Camden Council, the Court was asked to restrain presentation of two separate winding up petitions. As one of the first cases to consider the impact of COVID-19, it was decided that there was no evidence to suggest the winding up petitions were as a result of the coronavirus. The Court ruled that the petitions could go ahead and the debtor company was ordered to pay costs.
This decision is a clear statement to those businesses who are considering using the current pandemic as an excuse not to pay their debts. Businesses will be required to show supporting evidence that they are unable to pay their debts and that these debts occurred after the impact of the coronavirus. If businesses are unable to provide such evidence, it is highly likely statutory demands and winding up petitions will go ahead.
If you are a commercial property landlord and unsure if you can still pursue monies owed to you, contact our specialist team to discuss your options.
