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These are unprecedented times. For many businesses rent is one of the most, if not the most, significant outgoing. If your business has been affected by Covid19 and the associated isolation measures, you may find that you do not have the funds to meet your rent payments. This guidance looks at the legal options, the steps your landlord may be considering and practical suggestions for moving forward.

STOP PRESS: This note was last updated on 24 April 2020 and takes into account changes introduced by the Coronavirus Act 2020 and proposed changes to CRAR and the Insolvency and Corporate Governance Bill. It is important to note that these changes are designed to give tenants breathing space.


You need a clear picture of your financial position. This should include:

  • Management accounts
  • Cashflow forecasts
  • Will your landlord offer you a payment holiday or time to pay?
  • Will your lender offer you a payment holiday or time to pay?
  • Will your lender advance credit to allow you to pay your rent?
  • Will your other creditors offer you a payment holiday or time to pay?
  • Are you eligible for any government assistance?

Government Assistance

Full details can be found here.

The government support includes:

  • 12-month business rates holiday for all retail, hospitality and leisure businesses
  • £10,000 grant funding for all small businesses in receipt of small business rate relief
  • £25,000 grant funding for retail, hospitality and leisure rate businesses with property with a rateable value between £15,000 and £51,000
  • Business interruption loans for SMEs
  • HMRC time to pay scheme


Inevitably the downturn in the economy caused by Covid19 will result in the failure of some businesses. Failed businesses will mean empty units. For many landlords having a tenant who is covering the outgoings of a unit is preferable to having no tenant at all.

If you know that you are not going to be able to pay your rent, approach your landlord now. Landlords have outgoings too and will need to plan how to meet those. Approach your landlord with a proposal. The more you can offer to pay, the more likely your landlord is to be receptive. Landlords will be nervous of tenants choosing to pay other creditors instead of rent. Your proposals should be designed to reassure your landlord that this is not the case.

Consider offering some or a combination of:

  • time to pay agreements
  • rent holidays
  • rent reductions
  • security over assets

Keep in mind that the relief available to you and time payments to coincide with relief. Ensure any agreements reached are recorded in writing so all parties have certainty. Carefully consider how long an agreement should last. The situation is fluid. Ensure you have the capability to review or vary your agreement as the situation changes.

Rent Deposit

If you paid a rent deposit, consider:

  • the terms of the rent deposit deed
  • what does your landlord have to do to allow it to withdraw funds?
  • what does the deed say about you replenishing the deposit?
  • asking your landlord to take some or all of the rent payment from the deposit
  • if the rent deposit deed requires you to replenish the deposit negotiate an extension of time for doing so
  • if the rent deposit deed allows your landlord to take action against you if the deposit is not replenished, suggest a variation or waiver of those terms.

Ensure any agreements reached are properly recorded in accordance with the deed so that they are binding.


Have any directors or third parties guaranteed the rent payments? Review your lease, rent deposit deed or separate guarantees. Inform your guarantors that you are unable to pay the rent and they may be called upon to do so.

Break Clauses and Ending the Lease

If you cannot pay the rent now or anticipate that you will be unable to continue paying rent in the long-term, check your lease to see if you have any rights to bring it to and end. Often there is a process to be followed and you need to ensure that you do follow it to avoid any termination being ineffective.

Check the terms on which you occupy. If you are holding over or have a tenancy at will, you may be able to leave. Consider how to do this and what liabilities you may incur, for example, will you be liable for dilapidations.

If you do not have any contractual rights to end your lease, ascertain whether your landlord will consent to a surrender of the lease, and the terms on which it is willing to do so.

Steps Your Landlord May Take


Most commercial leases will contain a forfeiture clause allowing the landlord to recover possession of property if rent is not paid. Forfeiture brings the lease to an end. Landlords can forfeit in two ways:

  1. Pursuant to a court order
  2. By “peaceable re-entry”, essentially changing the locks and physically taking control of the unit.

If your landlord chooses to forfeit your lease, you should take urgent legal advice.

The right to forfeit is easily lost and it may be that the forfeiture is invalid. If your landlord uses the court route, you will have time. The court process takes several months in normal circumstances. Many courts are currently running at reduced capacity, so we expect to see a backlog of cases which will delay the court process further. If your landlord peaceably re-enters you will need to consider whether you want to object – it is possible that it will suit you to have the lease brought to an end. If you want to object, you need to act quickly. Even if you do not want to object to the forfeiture you will need to exercise your rights to recover your goods and the goods of third parties from the property.

STOP PRESS: Changes introduced by the Coronavirus Act 2020 prevent forfeiture whether by court order or forceable re-entry before 30 June 2020.

Commercial Rent Arrears Recovery (CRAR)

CRAR applies to all leases of commercial premises including tenancies at will and agricultural holdings, so long as the lease is in writing. It allows an agent to enter premises and recover goods which will be sold to re-pay the arrears, colloquially known as “sending the bailiffs in”.

If you receive an enforcement notice or a visit from an enforcement agent, check whether:

  • the agent is properly authorised
  • the property is “commercial premises” as defined in the legislation
  • the CRAR threshold of arrears has been met
  • the proper process has been followed

If you are satisfied that the enforcement is valid, offer a re-payment agreement.

STOP PRESS: On 23 April 2020 Alok Sharma, the Business Secretary, announced secondary legislation which will be introduced preventing the use of CRAR unless 90 days or more of unpaid rent is due. Anticipated to remain in force until 30 June 2020. More information please click here.

Court Proceedings

Unpaid rent can be claimed as a debt in court proceedings. The landlord may issue proceedings against the tenant company and any guarantors.

If you are served with proceedings, consider whether you have a defence or any rights of set-off.  Follow the court process carefully and comply with all orders and deadlines as failure to do so may result in judgment being entered against you.

If you do not have a defence, consider admitting the claim and asking the court to exercise its power to allow the judgment to be paid in instalments. The court does not have to exercise this power, but we expect it to do so in many cases in the coming months.

Insolvency Proceedings

Rent is usually a liquidated debt, due and payable immediately. The landlord may be entitled to apply to wind up the tenant or guarantor company or appoint an administrator. It may also be able to commence bankruptcy proceedings against individual tenants or guarantors. If you are served with insolvency proceedings you should take urgent legal advice.

STOP PRESS: On 23 April 2020 Alok Sharma, the Business Secretary, announced amendments to the Corporate Insolvency and Governance Bill to temporarily ban the use of statutory demands and winding up orders where a company cannot pay its debts due to COVID19. Current winding up petitions will be reviewed by the court to determine why the tenant cannot pay its debts. Anticipated to remain in force until 30 June 2020. More information here.

We Cannot Pay. We Cannot Reach an Agreement. What Now?

If the tenant company cannot pay, it may be insolvent. Directors should take advice from an insolvency practitioner if they suspect this is the case, especially as they may incur personal liability if they continue to trade a company whilst insolvent.

Insolvency doesn’t necessarily mean that the company will be wound up. There are other options including:

Voluntary arrangements

This is an agreement with creditors in respect of debts. It usually involves creditors accepting a reduced sum over a period of time. Creditors will be asked to vote on whether to accept or reject the proposal.

Voluntary arrangements may contain proposals which affect future rent and lease terms, including:

  • reduced rent
  • a waiver of dilapidations liability, and/or
  • rights for the tenant to terminate.


Administration allows a company to re-organise its affairs, recover debts and realise assets. An insolvency practitioner will be appointed to oversee the process (the Administrator). During the period of the administration creditors, including the landlord, cannot take steps to recover debts.

The purpose of administration is one or more to the following:

  • Rescue the company as going concern
  • Achieve a better result for creditors than would be obtained on liquidation
  • Realise assets for the benefit of secured or preferential creditors

Administration is often the option for a company which finds itself in difficulty as a result of a specific event, e.g. a bad debt or an unfulfilled contract.

We expect to see a rise in the number of companies entering administration in the wake of Covid19. In particular in the retail, hospitality and leisure sectors where companies were trading successfully but have found themselves in difficulty as a result of government advice to self-isolate.

We work closely with insolvency practitioners. We are happy to make an introduction if you think your business is or may become insolvent.

Latest updated on 24/04/2010

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.