Insolvency professionals are reporting an increase in the number of companies seeking help with issues relating to unpaid commercial rent arrears. The spike has occurred since 26th of March, when restrictions to prevent landlords issuing possession and rent distraint orders for commercial rent arrears were lifted.
However, the new rules only permit landlords to issue possession and distraint orders for those arrears which fall outside the pandemic period. According to Allan Cadman, North West chair of the insolvency trade body R3, due to confusion over the rules, in some cases businesses are facing legal demands for payment of the full amount of rent owed.
Allan explains: “Many companies, particularly in retail and hospitality, are still getting back on their feet after the pandemic and are unable to pay their rent arrears in full at the minute. But we have seen cases where, due to misunderstandings, they are receiving letters demanding immediate payment in full.
“This discrepancy can make all the difference to the survival of a struggling business. In one case we calculated that the amount that the company was required to pay was actually £90,000 less than the sum being demanded. It meant that the director was able to pay the immediate sum, continue in business and come to an arrangement over the remaining debt.”
Allan, who is also a partner with insolvency firm Poppleton & Appleby, says that companies should not be complacent over rent debt and should be pro-active in reaching out to landlords.
“Many landlords appreciate the difficulties that businesses are facing,” he says. “They recognise that engagement leads to better outcomes then enforcement and are usually willing to come to an arrangement about how and when they can be paid. However businesses need to speak to them at an early stage before they resort to legal action. It is always better to speak to the landlord rather than face the emotional costs of court cases and the risk of being forced to close.”
Unpaid Commercial rent arrears is a long standing issue with many small businesses. It is often the biggest overhead and the first to be affected by low trade. The unpaid commercial rent arrears are still owed even if the business has left the premises and are often chased by Debt Collection Agencies seeking to recoup unpaid arrears on behalf of the owner.