Extension to debt protections 'a key step on the way to recovery' for hospitality

By James McAllister

- Last updated on GMT

Extension to debt protections 'a key step on the way to recovery' for hospitality

Related tags: Rent, Rent arrears, ukhospitality, Coronavirus

UKHospitality has welcomed the extension of debt protections to commercial tenants, but says not prohibiting landlords from using County Court Judgments (CCJs) to chase rent arrears is a 'missed opportunity'.

Existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic, something the trade body has been working hard with the Government to achieve.

These measures will be extended until 31 March 2022, bringing it roughly into line with when the lease forfeiture moratorium, which prevents the repossession of commercial premises if businesses are unable to pay their rent due to the pandemic, is also due to expire​. 

Meanwhile, additional protections for non-rent debts will also be introduced to replace temporary measures brought in to support businesses from insolvency during the pandemic, which will be phased out from 1 October.

The new legislation will temporarily raise the current debt threshold for a winding up petition to £10,000 or more; and require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

These measures will also be in force until 31 March 2022.

"The success of our vaccine rollout means we are seeing life and the economy returning to normal with a strong rebound, and the time is right to lift the insolvency restrictions that were needed during the pandemic," says Business Minister Lord Callanan.

"At the same time, we know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures protections will help them to do that."

UKHospitality says the new protections will be particularly beneficial for beleaguered hospitality operators, giving them some breathing space to negotiate with suppliers, and will also provide time to find an appropriate arbitration mechanism that delivers on the ‘sharing of pain’.  

“The extension of existing protections, along with some further additional ones, is a very welcome response to our lobbying of Government to that end," says Kate Nicholls, chief executive of UKHospitality. 

“It is right and fair that the economic pain of the pandemic – in which hospitality was one of the worst affected sectors suffering long periods of forced closure and restricted trading – should be shared between landlords and tenants.

"This move will save thousands of businesses and jobs, and is a key step on the way to recovery for both the sector and the country.”

However, the trade body has lamented the 'missed opportunity' to prohibit CCJs, which are issued in England and Wales when people fail to repay money they owe and have been a tool used by some landlords 'in a vindictive, bullying and, ultimately, pointless manner'. 

It has previously been reported that 'multiple' hospitality businesses have faced court action over unpaid rent accumulated during the pandemic​, despite the protections afforded by the lease forfeiture moratorium.

CCJs can cost thousands of pounds to defend, and have a significant impact on a company's credit rating and long-term credit-worthiness.

UKHospitality adds that it would 'urge Government to close this loophole at the earliest opportunity'. 

Related topics: Business & Legislation

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