Following the UK Government's announcement on 23 April 2020 landlords now have more clarity - they are not going to be paid - at least not for the foreseeable future. The collection of rent arrears is described in the announcement as an "unfair practice". Any statutory demands made between 1 March and 30 June will be banned (retrospectively) and any winding up petitions presented between 27 April and 30 June will be "voided" where a company "cannot pay its bills as a result of the coronavirus".
There are various points that are worth considering. First, how is a court to determine whether the reason that a company can't pay its bills is as a result of the coronavirus? No doubt there may be a test outlined in whatever legislation the government intends to introduce in order to implement these policy decisions. However, that leads to the second point which is, how the court is supposed to deal with winding up petitions meantime? There is no obvious answer to that. On one view it would be a foolish landlord who now instigated a winding up petition knowing that it will be retrospectively invalidated. But if a landlord insists on a winding up petition, what is the court to do about it? Assuming that all the relevant criteria are met it is doubtful that the court has any power to refuse a petition absent legislation.
It is interesting to reflect on the consequences of this sort of protective measure. Landlords, or any creditors, are unlikely to sit back and allow their commercial rights or property rights to be eroded whether by legislation or otherwise. Certainly, in other areas of law, such as tax, retrospective legislation has not been treated kindly by the courts. Moreover, if the intention is to prevent aggressive enforcement of debt then while that may be achieved in the short term, any landlords still surviving at the end of this lockdown will likely want to pursue rent with an aggression and urgency the likes of which the courts will not previously have seen. The court system will need to be geared up to deal with a huge influx of business.
As an insolvency lawyer, it is easy to wonder whether letting tenants fall into administration or put themselves into administration voluntarily would not be a better option. Administration would give the tenants protection from creditors and the consent protocol developed by lawyers in England and Wales would allow directors to remain in control of certain aspects of the business assuming that the insolvency practitioner consented. Creditors would be treated equally and while they would only receive a percentage of their debt, they would be safe in the knowledge that they were being treated fairly and that the tenant was being supervised by an administrator which would minimise the risk of abuse by the tenant.
Finally, and sticking with administration, one wonders whether the proposed legislation has any impact on how rent is dealt with. At the moment, rent is treated as an expense of the administration but if it's not capable of being collected outwith administration why should it be? If tenants are only to be compelled to pay what they can afford then why should it be any different when the company is in administration?