Landlords, remember the Section 17 Notice time window

With businesses continuing to face an uncertain financial future amid during the current lockdown, late rental payments continue to be an unfortunate and regular side-effect of the pandemic. This has had a knock-on effect on landlords’ profits as well, with the government implementing various restrictions on the recovery of rent arrears that have been extended many times throughout the crisis. For example, forfeiture for non-payment of rent is suspended until 31 March 2021 (making it over a year since the measure was first put in place) and could be subject to further extensions.

Section 17 Notices

In circumstances where there has been an assignment, one method to which landlords may have recourse is to pursue former tenants and their guarantors for unpaid rent arrears under Section 17 of the Landlord and Tenant Covenants Act 1995.

If a lease is granted on or after 1 January 1996, a landlord will be able to recover unpaid rent from the former tenant if that former tenant had given an Authorised Guarantee Agreement (AGA), or from a guarantor who has guaranteed the performance of one under a ‘GAGA’.

Landlords cannot pursue a former tenant or their guarantor for charges dating back more than six months, unless they have first served a formal Section 17 Notice in the prescribed format. This means that it is very important for landlords to issue a Notice within six months of fixed charges becoming due; otherwise, it will become impossible to pursue the former tenant or their guarantor for charges falling outside this time period.

Landlords should note that only fixed charges such as rent and service charges for example, and interest thereon, can be recovered under this procedure.

Code of Practice for commercial property relationships

However, as with many things, the COVID-19 pandemic is rendering the situation more complicated. The government’s Code of Practice for commercial property relationships, which was published in June 2020 and applies until June 2021, has put significant pressure on landlords to reach rent concession agreements or payment plans with their tenants. Therefore, landlords looking to use Section 17 of the Landlord and Tenant Covenants Act should consider the duration of any rent concessions agreed, and the impact that they may have on their ability to recover rent arrears from a former tenant or their guarantor using a Section 17 Notice.

Essentially, landlords must look to strike the correct balance between compliance with the Code of Practice on the one hand, and the preservation of their rights on the other.

A difficult balance

With the pressure to support tenants through this difficult time warring with the need to survive it themselves, it is clear that this balance is a difficult one for landlords to achieve. That’s why Attwaters Jameson Hill’s expert Dispute Resolution lawyers are on hand to support landlords in successfully navigating their relationships with tenants. To get in touch with our team, please call Prabhi Ghura on 0203 871 0017 or email prabhi.ghura@attwaters.co.uk.