COVID-19 and payment of rent: What can be done?

COVID-19 has brought the country to a near-standstill. Public health and ensuring business continuity (and stability), two often conflicting issues, have to be considered against a background of economic stability and, more pertinently, cash flow issues.

Debtors are, more than ever before, forced to pick and choose between who to pay. This raises the question of enforcement of obligations and the challenges currently faced in light of recent developments affecting irritancy of leases, summary diligence, and the ease with which court actions may be raised.

Court actions

The usual method of recovering arrears is to sue. However, the courts are not conducting business as usual.

Currently, raising a court action, which cannot be classed as ‘urgent’ is now very difficult. Although it is possible for new actions to be lodged with courts, it is unlikely that those not classed as ‘urgent’ will be processed any time soon – it could, unfortunately, be months before these matters are dealt with! Many cases currently proceeding through the courts are being continued, with hearings being discharged until the public health situation improves. Others are being sisted (paused), which means that the case is essentially ‘put to sleep’ until the sist is recalled.

Given the uncertainty over when normality will resume, this has left those wishing to enforce obligations, which do not have an element of urgency, in a very difficult predicament.

The new Coronavirus (Scotland) Bill, which was passed by the Scottish Parliament on 1 April 2020 and is likely to come into force next week, after receiving Royal Assent, provides measures to make it easier for court business to be conducted by electronic means. This may make the conduct of urgent business smoother. However, the courts are continuing to deal with only urgent business.

Irritancy

Irritancy is a method by which landlords can terminate a lease, where, for example, the tenant is in breach of the lease provisions. Most often than not, the breach will be non-payment of rent or other arrears on the part of the tenant. The Coronavirus (Scotland) Bill introduces significant changes to the procedure for irritating leases.

Until now, under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, landlords must give tenants at least 14 days’ notice to pay any arrears before being able to irritate a lease due to a monetary breach. The Coronavirus (Scotland) Bill extends that minimum notice period to 14 weeks (rather than 14 days). 

These changes have retrospective effect as:

  1. they apply regardless of whether the breach arose prior to the passing of the Bill; and
  2. all irritancy notices which were served prior to the passing of the Bill but which had not yet expired are deemed void and of no effect.
Diligence

Diligence is the process by which (i) judgments and (ii) documents, such as leases, which have been registered in the Books of Council and Session for execution and preservation and which contain clear payment obligations, are enforced.

Diligence is carried out by Sheriff Officers and Messengers at Arms. As such, whilst the Bill does not deal with diligence per se, the current lockdown means that Sheriff Officers and Messengers at Arms are currently unable to provide their full range of services. 

Overall effect

The combined result of these issues is to reduce significantly the enforcement options available to all creditors. 

Whilst the current remedies available are limited these restrictions are intended to be temporary. The provisions in the Coronavirus (Scotland) Bill require the Scottish Ministers to report on their continued necessity every 2 months and the measures in the Bill automatically expire after six months. The restrictions on the availability of courts and enforcement should begin to ease as and when lockdown eases.

This article was co-written by Charlotte Fleming.

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