The Government has announced that the ban on forfeiture based on rent arrears and the restrictions relating to the exercise of Commercial Rent Arrears Recovery to enforce unpaid rent on commercial leases will be extended until the end of the year, so the tools in a commercial landlord’s armoury against a defaulting tenant remain limited. However, the stay on possession claims introduced in response to COVID-19 was lifted on 20 September 2020. Commercial landlords will no doubt be keen to progress possession claims which had been stayed where they can and this article considers how to go about this.
Practice Direction 55C (“PD 55C”) makes temporary modifications to the Court Rules, the Civil Procedure Rules, during an “interim period” which spans from 20 September 2020 to 28 March 2021. Crucially, PD 55C sets out the steps required to reactivate stayed claims.
What do I need to do now?
To progress a possession claim now that the stay is lifted, the rules differ depending on whether the claim was started before 3 August 2020 or after that date.
Stayed claims brought before 3 August 2020:
For those claims that were brought before 3 August 2020, and which were affected by the stay, one of the parties will need to file and serve a reactivation notice in order to reactivate the claim (unless a final possession order has already been made). If a reactivation notice is not filed and served then these claims will not be listed, heard or referred to a Judge.
The reactivation notice can be filed and served at any time from 21 September 2020 until 4:00pm on 29 January 2021, after which the claim will automatically be stayed. However, if you want your claim to get in the queue for a hearing, or referral to a Judge, it would be advisable to serve a reactivation notice sooner rather than later.
Furthermore, if you had a trial date set before 27 March 2020 (the beginning of the original stay) that you want to preserve it is important to serve and file a fully compliant reactivation notice at least 42 days before that trial date, otherwise your listing will be vacated and the case stayed.
A Claimant landlord’s reactivation notice must confirm the party’s intention to have the case listed, relisted, heard or referred and, except in appeals, it must set out what knowledge the party preparing it has as to the effects of COVID-19 on the Defendant tenant (and, if relevant, their dependents). If the claim is for rent arrears, the landlord filing and serving the reactivation notice must provide an updated rent account for the previous two years with it.
The Government has released a precedent reactivation notice. Whilst PD 55C does not specify that a specific form of notice must be used it will be good practice to make use of this form of reactivation notice as the Courts are likely to become familiar with it quickly.
If case management directions were made before 20 September 2020 the party filing and serving the reactivation notice must include:
- a copy of the last directions order together with new dates for compliance with those directions recalculated so as to take into account the stay that was imposed until 20 September; and
- a new draft directions order (which proposes a new hearing date); or
- a statement in writing that no new directions are required and that an existing hearing date can be met; and
- a statement in writing confirming whether the case is suitable for hearing by video or audio link.
If you have a reactivation notice served on you and you disagree with the content referred to at points 1-3 above then you will need to file and serve a response within 14 days of service of the reactivation notice on you.
New claims and stayed claims brought on or after 3 August 2020:
A reactivation notice is not required for ‘new’ claims (brought after 19 September 2020) or for stayed claims brought on or after 3 August 2020. Instead, in these cases, at least 14 days before the hearing the Claimant landlord must serve on the Defendant tenant a notice setting out what knowledge it has as to the effects of COVID-19 on the Defendant (and, if relevant, its dependents) and take two copies of this to the hearing.
All claims - knowledge of the impact of COVID-19 on the tenant
Both reactivation notices and notices which have to be served on the Defendant tenant at least 14 days before the hearing need to confirm what knowledge the Claimant landlord has as to the effects of COVID-19 on the Defendant tenant.
PD 55C sets out no further detail on this requirement, so it appears that if a party has no knowledge of the effects of COVID-19 on the Defendant then it would suffice for that party to simply state that they have no such knowledge. However, whilst it does not appear to be mandatory to engage with tenants and make enquiries to obtain information as to the effects of COVID-19 on them it would be advisable to take steps to try and do so. Judges are likely to be keen to have this information at their disposal and, in practice, tenants may well be more than willing to provide this information as it is likely to be in their interest to do so.
Whilst we do not yet know how the Courts will approach the reactivation process, we do know that the Court lists are going to be busy and if a landlord has not taken positive steps to understand what the impact of COVID-19 has been on the tenant, there must be a risk of hearings being adjourned. In such circumstances, the wait for a re-listed date could be substantial and so, in the short term at least, we would recommend that landlords pursuing possession claims should take steps to understand how COVID-19 has impacted their tenant in order to manage the adjournment risk.
All claims - settlement
The Master of the Rolls’ Working Group on Possession Proceedings has made it clear that claims for possession should not be re-started (and new claims should not be brought) without first making careful efforts to reach compromise. The possibility of, and attempts at, settlement should therefore be explored before reactivating your claim.
One procedural change which reflects the Court’s increased emphasis on settlement is the introduction of a new ‘review hearing’. All cases, stayed and new (with the exception of accelerated possession claims), will proceed to a ‘review hearing’ before any substantive hearing takes place.
The review hearing is an important new procedural stage intended to encourage the parties to reach agreement if possible before or on the day of the review hearing. 14 days before the review hearing the Claimant landlord has to comply with various requirements relating to the provision of review hearing bundles and has to confirm to the Court that they will be available on the day of the review hearing (by telephone will suffice) to discuss the case with the Defendant or their adviser. We recommend that in the lead up to the review hearing landlords review their position carefully with their legal advisors and consider what settlement parameters would be acceptable to them. Doing so will enable you to commence settlement discussions on or before the day of the review hearing from a position of knowledge and, therefore, strength.
The review hearing will last just 5 minutes and will be conducted at the end of the day (without the parties in attendance) so that any consent orders agreed on the day can be sent to the Judge and an appropriate order made. If agreement has not been reached by the time of the review hearing then the Judge will decide whether to dismiss the claim, make directions or list it for a substantive hearing.
Given the impending backlog of cases it is not surprising that the Courts will be encouraging settlement now even more than ever. It will therefore be prudent to make serious attempts to reach a settlement, if at all possible, as well as taking steps to file and serve reactivation notices where appropriate. If a settlement can be achieved before getting to a hearing this will save time and expense for the parties as well as highly sought after Court resource.
However, there will be cases which cannot be compromised despite the best efforts of the parties. Commercial landlords may find some comfort in the knowledge that the Courts will be operating a prioritisation system, and cases that will be prioritised include those involving alleged squatters, illegal occupiers or persons unknown and cases with alleged extreme rent arrears (being arrears equal to at least 12 months’ rent, or 9 months’ rent where that amounts to more than 25% of a private landlord’s total annual income).