The temporary ban on the use of statutory demands and winding up petitions (Corporate Insolvency and Governance Act 2020 ("CIGA")) was due to expire on 30 September 2020, but has now been further extended to apply until 31 December 2020.
Where are we today?
As matters stand, statutory demands may still be served, but they cannot form the basis of a winding up petition.
A winding up petition may still be presented in circumstances where it is established that Covid-19 has not had a financial impact on the tenant or, the tenant would be unable to pay its debts regardless of Covid-19.
CIGA does not apply to individuals. Where a tenant is a named individual, enforcement via statutory demand and subsequent bankruptcy petition remains available. It is an unfortunate consequence that the temporary reprieve applies to action against corporate entities large and small but omits your local hairdresser or butcher.
Court proceedings remain an accessible method of recovering arrears. There is sometimes a sense that court proceedings can be protracted and costly. It is true to say that cases which run all the way to a trial take time and will incur substantial spend on both sides. But, more often than not, cases do not run all the way to trial; and, it is possible to bring a case to court for consideration at a simple hearing shortly after issuing proceedings.
This is done by way of an application for summary judgment (and/or strike out). A court may award summary judgment if the defendant has no real prospects of successfully defending the claim and/or strike out of any defence where the defendant discloses no reasonable grounds of defending the claim. Such an application can be effective where there is a paper lease or tenancy document in existence, giving rise to an express obligation on the tenant to pay rent. The contractual obligation to pay rent is a clear and obvious case ripe for summary judgment.
Where are we going?
Landlords and tenants who fail to find resolution when putting the voluntary 'Code of Practice for commercial property relationships' into practice, are likely to wait to see what further measures may be introduced in the new year. Where the ban expires, landlords are unlikely to wait too long after the final rendition of Auld Lang Syne before taking action.
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