UKHospitality urges government to close rent debt 'loophole'

UKHospitality has welcomed the extension of debt protections for tenants but urged the government to close a ‘loophole’ on County Court Judgements.

Existing restrictions on commercial landlords from presenting winding-up petitions to limited companies over unpaid rent will remain in place until 31 March 2022.

The government said it will implement a ‘rent arbitration scheme’ to deal with rent debts accrued during the pandemic.

New measures will be brought to protect smaller companies from insolvency, replacing temporary measures brought in during Covid-19 which will be phased out from 1 October. These will protect businesses from creditors insisting on repayment of small debts by raising the current threshold for a winding-up petition to £10,000 or more.

Creditors will also be required to seek proposals for payment from a debtor business and must give them 21 days to respond before they can begin winding-up action. Both new measures will be in force until March 2022.

Business minister Lord Callahan said: “We know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures protections will help them to do that.”

UKHospitality welcomed the new measures but said it was a “missed opportunity” not to prohibit County Court Judgements. The trade body previously warned these are being used as a "threatening tool" by some landlords to force businesses to make payments.

"We would urge government to close this loophole at the earliest opportunity," UKHospitality said in a statement.

County Court Judgements are issued in England and Wales when people fail to repay money they owe. No enforcement action can be taken as a result, but they can damage the reputation and credit rating of a business, leaving some feeling they have no choice but to pay.

Earlier this year Caffe Concerto told The Caterer it was facing a county court ruling from one of its landlords, while Tampopo owner David Fox told the BBC he had been threatened with a similar judgement.

Kate Nicholls, chief executive of UKHospitality, added: “The extension of existing protections, along with some further additional ones, is a very welcome response to our lobbying of government to that end.

“It is right and fair that the economic pain of the pandemic – in which hospitality was one of the worst affected sectors suffering long periods of forced closure and restricted trading – should be shared between landlords and tenants. This move will save thousands of businesses and jobs, and is a key step on the way to recovery for both the sector and the country.”

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