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Legal Update: Winding-Up Orders

Although there are some temporary changes to Insolvency Law, they do not currently cover the suspension of winding-up orders.

There is therefore nothing to prevent commercial landlords from serving a Statutory Demand or a winding-up petition if rent is not being paid.  In the same way, there is nothing to stop a commercial landlord from suing the tenant for rent arrears.  It is only evictions which are temporarily suspended.

However, in reality it will be a slow process at the moment for landlords to obtain a winding-up order.  The courts have reduced staff and will be prioritising matters concerning loss of liberty and vulnerable people.  Existing petitions are being adjourned in some courts while the courts consider if they are able to deal with hearings remotely, and it is likely this will create a backlog.  New petitions are likely to be processed slowly.  If the landlord goes ahead and makes their tenant insolvent, the lease will usually be disclaimed and the landlord will usually be among all of the other unsecured creditors with no guarantee of recovering any rent, and of course they are then left with no tenant when normal business resumes.

In view of this, it is possible that commercial landlords are using statutory demands as a threat, in an attempt to get their tenants to prioritise paying their rent, and make them aware that there is no right to a ”rent holiday”, but in the full knowledge that to obtain a winding-up order at this time will be a long haul and may not in any even have the desired outcome.

Tenants should be engaging with their landlords if possible (and vice versa) and trying to come to an arrangement to defer, reduce, or use rent deposits.