Insolvency is, unfortunately, looming for many. The coronavirus has caused vast economic upheaval in the UK, perhaps unprecedented and certainly on a scale not seen since the 1930s. Many businesses have found themselves unable to pay the rent and service charge on their premises, and residential tenants have been similarly affected by the loss of employment income. The high street has seen an increasing number of retail businesses entering into administration in an attempt to control the losses they have suffered.
In an attempt to stem what might otherwise be an unstoppable avalanche of insolvency, the Westminster government passed legislation in the spring of 2020, tightly restricting the circumstances in which a winding up petition can be presented. A winding up petition is the first step in company insolvency court proceedings and it is based on the company being unable to pay its debts as they fall due.
The government has temporarily banned anyone owed a debt relating to commercial rent arrears and/or commercial property service charge from serving a statutory demand or winding up petition. The courts are required to look at any demands or petitions issued and they will be rejected by the court if the reason for non payment is as a result of coronavirus.
Even the non-insolvency Commercial Rent Arrears Recovery (CRAR) process has been affected by the government’s emergency legislation, with the amount of debt required to be owed extended to 90 days from the usual seven before landlords can use any of their Commercial Rent Arrears Recovery rights.
How have agents been impacted by insolvency?
The traditional high street bricks and mortar business offering letting agency and estate agency services has been threatened over the last number of years by the surge forwards in newer, more innovative businesses offering these services online, forcing businesses to adapt to survive. Add to this trend the huge economic disruption caused by Covid-19 and some such agents find themselves struggling with their own potential insolvency.
Agents may also find themselves in the situation of being unable to recover rent for the landlords they act for, and therefore their own costs, due to the precarious financial position some tenants have found themselves in as a result of the coronavirus outbreak. The restrictions on residential possession claims have now been eased but it will take many months for the courts to clear the backlog of claims that have arisen, let alone to tackle what is likely to be a much higher court workload than normal in the coming months.
What action can agents take?
In the short term agents will need to recover as much of the rent and service charge owed to them as possible in order to keep themselves and the landlords they act for afloat.
It is more important than ever that agents and landlords keep on top of property management. A full property inspection at the outset of the tenancy, coupled with periodic inspections and an end of tenancy check, will help to keep time consuming end of tenancy disputes to a minimum. Attending to property maintenance issues as soon as they arise can help to keep costs to the lowest possible level, too, by fixing problems before they become larger and more costly.
Providing tenants with an easy way to contact their landlord or agent and log any issues helps ensure that you are made aware of problems as soon as they arise.
Our property reporting solution is made efficient with ready-made and customisable templates for reports, and an app to be used ‘on the go’ so that you do not even have to wait until you return to the office to log data.
Keeping on top of management now will put you, your clients and their portfolios in the best possible situation to take advantage of the eventual upturn in the market, and to minimise the risk of disputes now. Using the best technology available helps you respond to customer needs and to work more efficiently, reducing your costs and maximising your profitability.