Reports in the UK media suggest that an increasing number of landlords are now threatening legal action against hospitality operators after many tenants are withholding rent to preserve cash during the lockdown. Examples of tenants like Pho, Escape Hunt and Caffe Concerto are amongst those who have been threatened with action.
We are leading experts specialising in insolvency proceedings. Our experienced City of London solicitors and barristers regularly assist companies facing a HMRC winding up petition; individuals served a statutory demand; or creditors owed money and considering issuing a winding up petition.
Landlords winding up action for unpaid rent
A Winding up petition has been presented to Caffe Concerto where the court order has forced the insolvent company into compulsory liquidation after it did not pay a £100,000 rent bill- from Criterion Capital, Owner of its Haymarket site.
Director of Caffe Concerto Stefano Borjak told the Financial Times:
“They are trying to wind up a company, which has a £40 Million turnover a year. The cash flow we have at the moment, we need to pay staff.”
Stefano Borjak (Director of Caffe Concerto)
Pho and Escape Hunt have been threatened to face legal action according to the letters seen by the Financial Times as if they do not pay the full rent for the next quarter to Sykes Capital (Landowner) of their Reading sites.
The letter reveals:
“We appreciate the difficult times, however, payment of rent should be one of the highest priority business expenses.”
Letter from Sykes Capital
How are landlords affected by unpaid rent pursuant to lease agreements?
After the Government granted tenants a three-month moratorium against eviction for non payment, some landlords received less than a third of their expected rent.
Martin Edwards property disputes partner at Shakespeare Martineau said:
“Among all of the noise around withheld payments, all business tenants- including retailers- must understand that the emergency legislation rushed through by government this week does not mean they can avoid paying any rent at all .”
Martin Edwards, Property Dispute Partner at Shakespeare Martineau
What other options are available for landlords to pursue unpaid rent whilst forfeiture is prevented under the Coronavirus Act 2020?
Landlords are currently prevented under the Coronavirus Act 2020 for issuing forfeiture proceedings against tenants for unpaid rent until the current moratorium ends which is 30 June 2020 which could be extended by the government. However there are many other options available to pursue non-payment of rent from tenants which include:
- Making a Debt Claim
- Issuing a statutory demand
- Commencing winding up proceedings
What is a Debt Claim?
You as the landlord can issue a civil claim for the unpaid payment of rent. Interest is then charged at the rate set out in the lease on the debt sums. You can apply to a county court to claim unpaid sums you are owed by the tenant.
What is a Statutory Demand?
A statutory demand is in essence a demand for payment of a debt served upon an individual in accordance with Insolvency (England and Wales) Rules 2016. It is a document served by a creditor upon a debtor that is intended to prove that the debtor owes the specified sum of money.
Although serving a statutory demand does not involve the court (and there are no court fees to pay), a creditor must still follow the correct rules of service, as incorrect service could be fatal to the debt claim.
The statutory demand is intended to be relied upon in further legal proceedings against you (to bankrupt an individual) and which ought to:
- provide details of the financial claim, with interest calculated to the date of the demand;
- be served on you as debtor personally or by post; and
- tell you what to do to comply with the demand, have it set aside and the consequences of doing neither.
What is a Winding Up Petition?
Presenting a winding up petition to the Court is the most serious debt recovery action that can be taken by a creditor. It requires the petitioner to be able to demonstrate that it has a liquidated debt of at least £750 which is not in dispute, this is normally evidenced by a statutory demand which is not set aside or a Judgment of the Court. Winding up petitions may be issued at Court against either a Company or a Partnership, the latter (a petition to wind up a partnership) is usually accompanied by individual bankruptcy petitions for each of the partners. The winding up petition is the precursor to the compulsory liquidation of a company or the dissolution of a partnership if not properly dealt with by the Directors or Partners and in essence means that a creditor is asking the Court to wind up a business and have an insolvency practitioner distribute the assets of that business amongst all creditors.
Specialist London Winding-up Petition Lawyers
We’re masters of insolvency dispute litigation. We are a specialist City of London law firm made up of Solicitors & Barristers. We’re based in the Middle Temple Inns of Court (next to the Royal Courts of Justice where the High Court and Central London County Courts are based). We’re experts in dealing with matters surrounding insolvency in particular our team have unparalleled experience at both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.