David Fox, founder of Manchester-based pan-Asian restaurant group Tampopo, has revealed he was issued a county court judgement (CCJ) after being unable to repay the outstanding rent, despite the landlord in question still negotiating repayment of the arrears.
Speaking to the BBC, Fox said: "I was surprised and a bit cross to find I was issued the county court judgement,"
“I said it wasn’t fair and we then agreed I would pay a certain amount in arrears and the CCJ was dropped a month later.
“But the threat of the CCJ is still hanging over me and I don’t want to have to spend money I can’t spare on legal fees.
“Any of my landlords have the right to issue CCJs, but if that happened across my restaurants I’d go bust.”
Trade body UKHospitality has said multiple businesses and hundreds of premises have been affected by CCJs, which are issued in England and Wales when people fail to repay money they owe.
It said the main impact is on companies' credit rating and long-term credit-worthiness, as the debt cannot be collected or the ruling enforced against.
However, it warned CCJs can cost many thousands of pounds to defend.
"We'd encourage both landlords and tenants to negotiate in a positive spirit," a UK Hospitality spokesperson told the BBC.
"CCJs have little real-world impact with protections in place and we'd urge landlords not to pursue them.
"They simply add cost, worry and antagonise the relationship, which adversely affects negotiations."
The news follows the Government's announcement earlier this week that the lease forfeiture moratorium, which prevents the repossession of commercial premises if businesses are unable to pay their rent due to the pandemic, will be extended until March 2022.
Confirmation of the extension was delivered in the House of Commons on Wednesday (16 June) by Chief Secretary of the Treasury Steve Barclay, who said the decision 'strikes the right balance between protecting landlords and supporting those businesses that are most in need'.
A new arbitration mechanism will also be introduced in legislation to help landlords and commercial tenants resolve disputes over arrears.
"We will introduce legislation in this parliament session to establish a backstop so that where commercial negotiations between tenants and landlords are not successful, they go into binding arbitration,” Barclay said.
“Until that legislation is on the statue book existent measures will stay in place, including extending the existing moratorium in place to protect tenants from eviction to 25 march 2022.
“All tenants should start to pay rent again in accordance with the terms of their lease or as otherwise agreed with their landlord."