Commercial Landlords - a narrowing of rights & available remedies.

On 20 May 2020 the UK government introduced the Corporate Insolvency and Governance Bill to Parliament and announced the Bill's stated purposes as including:

'..to temporarily suspend parts of the law to support directors to continue trading through the emergency without the threat of personal liability and to protect companies from aggressive creditor action.'

The Bill is presently continuing its passage through the UK Parliament but in Gibraltar similar measures - with the same stated aims - have already been introduced onto the statute book by the commencement, on 29th May 2020, of the Insolvency (Amendment) Act 2020 ("Act").

Whilst it is of course a welcome development to shield individuals from personal liability in the exceptional trading environment thrown up by the current pandemic, what of the effects of the Act on commercial landlords (many of whom are already facing reduced rent collections following the Gibraltar Government's initiative in encouraging landlords to reduce their commercial rents by at least 50% during the months of April, May & June)?

Prior to the Act's commencement, over and above the landlord's right to seek forfeiture of the lease through the Courts, a landlord had alternative options available to it to include:

- forfeiture by way of peaceable re-entry into the premises;

- service of a statutory demand on a defaulting tenant for any outstanding rent due; and

- the filing of an application, as a creditor for unpaid rent, for the appointment of a liquidator.

All of these rights / remedies have been temporarily suspended under the Act during the continuance of a 'moratorium period'. This period is (retrospectively) effective as of 16th March 2020 and, as it currently stands, is due to run until 31st December 2020.

Whilst it may be true to suggest that, in certain circumstances, pursuing any of these remedies may be construed to be 'aggressive', it is likely that there will unfortunately be instances where commercial tenants seek to unjustifiably avail themselves of these temporary restrictions to avoid the timely settlement of rents due which may leave landlords in a precarious financial position thus undermining - in a small measure - the very foundations of the economic recovery the Act is designed to nurture.

So what to do if you are a landlord and believe yourself to have a commercial tenant acting in this manner? There may be a number of options still available to you.

Rent Deposit Deed - this should provide you with the ability to use the deposit (in full or in part) in settlement of the outstanding rents and then seek an equivalent 'top up' from the tenant. This will allow you to stabilise your immediate cash flow needs and, if not paid, pursue the top up payment from the tenant after the moratorium period.

Guarantor / Surety - if there is a guarantor or surety guaranteeing your tenant's covenants under the lease, you remain entitled to seek payment of the outstanding rents from the guarantor / surety.

Bank Guarantee - if you have the benefit of a bank guarantee, you can call on this to meet the outstanding rent due.

Court proceedings - issue a claim in the Courts for payment of the outstanding rent due.

These remedies - whilst continuing to be available - should very much remain a matter of last resort with positive engagement and dialogue encouraged between the parties in these exceptional times.