Latest UK Government Measures in the Insolvency and Commercial Rental Market

March 2022

By Stephen Phillips, Temple Bright

Stephen Phillips | Partner

T. +44 (0) 20 7139 8233

M. +44 (0) 7811 113 895

The UK government has been looking to normalise the UK economy post the covid pandemic and it has brought to an end many of the number of temporary business relief measures. Many of the measures limiting the ability to wind up a company for unpaid debt have expired. The last remaining temporary fetter on winding up companies will expire on the 31 March 2022. From this date the law will no longer prevent a company being wound up for an ‘excluded debt’, being a debt under Part 2 of the Landlord and Tenant Act 1954(4) – in other words business tenancies. There were also some restrictions on taking actions on debts £10,000 or less which are falling away on the same day.

Whilst it is expected that most landlords and tenants will have come to an amicable agreement as to rental arrears accrued in the pandemic some will have not. The government has introduced the Commercial Rent (Coronavirus) Act which received the Royal Assent on 24th March 2022, which aims to introduce a binding arbitration process to be used when commercial landlords and tenants are unable to agree how to deal with outstanding rent arrears built up during the pandemic. It was expected that this measure would come into effect prior to the expiry of the temporary measures outlined above and the government has achieved this.

I imagine many tenants have decided to close their businesses without waiting for landlords to take action and this is reflected in recent monthly statistics issued by the government insolvency service. In February 2022 there were 1,329 Creditors’ Voluntary Liquidations (CVLs), more than double the number in February 2021.

My expectation is that given recent inflation news, and the squeeze on current incomes, which will be reflected in a reduction in consumption activity, the insolvency sector is likely to be busier for the rest of the year. It remains to be seen how the arbitration process mentioned above will work in practice – the Act is so fresh a copy is not yet available.