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Davidson Chalmers Stewart | Lawyers. For Business.

Demanding Times – Tenants Unable to Pay their Rent and the Use of Statutory Demands by Landlords

Date: 27/04/2020 | COVID-19, Dispute Resolution, Real Estate

The Coronavirus (Scotland) Act 2020 extended the 14 day period that a landlord was required to give to a tenant to make payment of outstanding rent to 14 weeks. Whilst the intention of this change in legislation by the government was clear, it was met with alarm by some landlords who felt that tenants could now ‘avoid’ paying rent for a period of 14 weeks.

This had led a number of landlords to serve Statutory Demands on their tenants requiring the outstanding rent to be brought up to date within 21 days, failing which non-payment would be used by the landlord to evidence that the tenant was technically insolvent and could therefore be wound up by the courts.

On 23 April the UK Government announced that it intended to put a temporary ban in place for landlords using what it describes as ‘unfair’ and ‘aggressive debt recovery tactics’ in the form of Statutory Demands.

This new measure is meant to give tenants breathing space so they do not fall into further financial distress. However, the UK Government has called “on tenants to pay rent where they can afford it or what they can in recognition of the strains felt by landlords too”.

The draft legislation is not yet available so there is no guidance yet on who should pay rent during the temporary ban. As things stand the temporary ban is intended to last until 30 June 2020 but this is subject to review.

There has been no discussion about whether or not this new ban on the use of Statutory Demands will be implemented in Scotland but is very likely the same measures will be introduced in Scotland in due course. The draft legislation should make it clear what status Statutory Demands have that have been served with the 21 day period for payment still being live.

There has been no specific mention of Charge for Payments or other forms of diligence that can be used by landlords and if these will be impacted by the changes in legislation.

There has been no announcement yet about what measures are going to be introduced to assist landlords who are faced with the prospects of having tenants who are not able to pay their rent. We would expect that something will be forthcoming on that though.

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

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