Dilapidations update: The effect of the COVID-19 pandemic on insolvency claims and landlord and tenant disputes

Abstract

This paper addresses the ongoing impact of the COVID-19 pandemic on insolvency claims and real estate disputes between landlords and tenants. In particular, focus is given to the effect on, and changing consumer patterns in relation to, the retail and hospitality sectors and the knock-on effect this has had on landlords of business tenants. The number of company voluntary arrangements (CVAs) has grown significantly and is likely to remain high throughout 2021 and into 2022. While the Government tried to reduce the number by the introduction of the CIGA 2020 Restructuring Plan, which has several benefits over the usual CVA route, this is but one of various pieces of legislation brought in by the Government in an attempt to address the issues raised by COVID-19. There have been many restrictions introduced which limit landlords and their ability to bring insolvency claims, to seek forfeiture of a lease or to pursue rent arrears which are being phased out as of 1st October, 2021, with some landlord restrictions being wholly removed by 30th March, 2022. From recent government announcements, it appears some of the restrictions are here to stay. While both tenants and landlords struggled to survive in the midst of the UK’s national lockdowns, the Government now seems to be making it clear the economy is open for business, not quite as usual, but heading in that direction. It remains the case that some are still struggling and that negotiation with regards to payment of rent and possible rent reductions are an important tool on both sides. It will also be important for landlords to consider their options with regards to seeking repayment from third parties should it prove unviable to recover from tenants directly. Overall, it is likely we will see a change in the relationship between landlords and tenants and the terms on which they are willing to engage in the future.