In previous blogs, we’ve discussed the temporary changes to the law being brought about by the UK Government’s Corporate Insolvency and Governance Bill. The Bill is set to strip Landlords of some of the tools available to recover arrears from their tenants. It will render statutory demands served between 1 March to 30 June 2020 ineffective, while making it near impossible for landlords to liquidate tenants (by winding them up) if they have been financially affected by COVID-19.

In brief

The following measures introduced as a COVID-19 response are now to be extended:

There may now be little time for the voluntary re-scheduling of lease payments due on and after the June 2020 quarter day. Andrew Walker QC explores the reasons why. 

For months, landlords and tenants impacted by the COVID-19 pandemic have wondered whether force majeure clauses in leases would excuse a tenant's non-payment of rent. On June 3, 2020, a Bankruptcy Court for the Northern District of Illinois offered us an early look into how courts might interpret such clauses in the midst of the current crisis. In In re Hitz Restaurant Group, No. 20-B05012, 2020 WL 2924523 (Bankr. N.D. Ill. June 3, 2020), the Bankruptcy Court ruled that Executive Order 2020-7, the Stay-at-Home Order (the "Order") enacted by Illinois Governor, J.B.

Ever since governors across the country implemented Stay at Home orders to slow the spread of COVID-19 by closing non-essential businesses, experts have debated whether a force majeure provision of a lease would excuse a tenant’s obligation to pay rent.

Force majeure clauses and the doctrines of impossibility and/or impracticability remain among the most-discussed legal topics of the COVID-19 pandemic. Courts across the country, finally open, are grappling with those issues and giving some insight as to how these topics may play out in future cases.

Section 82 of the Coronavirus Act 2020 prevents landlords from forfeiting ‘relevant business tenancies’ until 30 June, and possibly longer. Regulations have also been made restricting the use of commercial rent arrears recovery (CRAR) during the same period, and emergency legislation is promised preventing landlords from serving statutory demands and instituting insolvency proceedings. But tenants should think twice before withholding rent and other lease payments, and landlords do not necessarily have to take a passive role.

Landlords are receiving a deluge of requests to provide rent relief to commercial tenants whose operations have either been closed or substantially restricted as a result of state and local governments’ COVID-19 stay-at-home orders and related restrictions. Some tenants are using the threat of a bankruptcy filing as leverage to obtain these concessions. Meanwhile, landlords are facing their own challenges with mortgage lenders and servicers as they try to service real estate loans with limited available cash.

The Federal Court of Australia in Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 has made orders to release the administrators of retailer The Colette Group (the Group) from personal liability for rent for a two-week period during the COVID-19 pandemic. 

Previously we reported on debtors’ appeals to bankruptcy courts’ general equitable powers for assistance in weathering the COVID-19-induced economic storm. (Our original article may be viewed here.) This trend remains and bankruptcy courts are demonstrating a continued willingness to entertain and offer such relief.