Global law firm DLA Piper has been sharing their thoughts on the subject…

DLA Piper’s view on the legislation: “The current legislation, whilst very welcome for tenants, does not deal with the substantive problem of debt being built up and long-term balance sheet issues. It provided no solution for tenants once the restrictions expire and they have significant rent arrears. The proposed new legislation may assist with this – it looks set to ringfence the arrears accrued during the pandemic and require landlords and tenants to agree on how those arrears will be dealt with, or face binding arbitration.”

The impact on landlords: “The new provisions (in combination with the forfeiture moratorium for unpaid rent) will, temporarily at least, limit options for the recovery of unpaid rent significantly. However, there is nothing to stop landlords being able to deploy other remedies, for example court debt claims, utilising (essentially drawing down on) rent deposits (provided the provisions of the deed are strictly adhered to), demanding and pursuing payment from current tenant guarantors or threatening to make a court application for an administration order. However, such other remedies are either costlier and/or less effective than the threat of forfeiture or winding up and, as a result, landlords are, in the short-term at least, shouldering a disproportionately high burden.”

The impact of winding-up petitions and statutory demands: “The ‘financial effect’ test will be met if (and only if) the company’s financial position has worsened in consequence of, or for reasons relating to, COVID-19 – it is seemingly a very low bar and something which a creditor will find very difficult to argue against particularly for any debtor in the non-food retail, leisure and restaurant sectors.”

New laws to tackle accrued rent arrears of businesses forced to shut during lockdowns: “The detail is, as yet, unclear but the aim appears to be to encourage tenants to prioritise the payment of future rents and to introduce protections for tenants in respect of older “ringfenced” Covid arrears. We understand the aim is for the existing restrictions to be lifted for any non-ringfenced arrears once this new law is in place. We do not yet have a timetable for the new legislation.

“It is also currently unclear how the new legislation will interact with restructuring processes, such as CVAs and restructuring plans, which can be used to compromise rent claims without the consent of all landlords via the “cram down” mechanisms available through those processes.”