Insolvency professionals are reporting an increase in the number of companies seeking help since 26 March, when restrictions to prevent landlords issuing possession and distraint orders for 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 and restructuring 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.”
However 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.”