Last week the Government announced its plans to offer additional support to commercial tenants worst affected financially by the forced closure of businesses during the pandemic. The recent proposals will see an additional 9 month extension to the existing restrictions first imposed on commercial landlords in March and April of last year, preventing them from taking forfeiture and eviction action against tenants with commercial rent debts.
The government introduced various protective measures last year and present plans will see the existing schemes now come to an end in March 2022 with the government:
- Extending restrictions preventing landlords from using the Commercial Rent Arrears Recovery (CRAR) process.
- Continuing the protection currently provided that precludes the forfeiture of business tenancies due to rent debt.
- Introducing new rules to “ringfence” commercial rent arrears (Covid-related only) and force commercial landlords and tenants to work together to agree longer-term repayment plans.
In addition to the above, the government is also extending the different insolvency measures introduced as part of the government’s plans to help businesses recover from their sudden and prolonged inability to earn an income. These include an extension to the current restrictions on the presentation of statutory demands and winding up petitions for pandemic-related debts, though for an additional 3 months only, up until 30 September 2021.
The government led initiative to prevent evictions has been extended on a few occasions already since the early days of the pandemic but was due to come to a final end on 30 June 2021, following the anticipated removal of the remaining pandemic restrictions this week. The Prime Minister’s late postponement of this removal has caused the government to reconsider and although welcomed with open arms by tenants desperate for more time to recover, this additional lifeline of a further 9 months relief has received some criticism from the British Property Federation and other voices within the property industry.
Whilst it is accepted that some commercial tenants have been unable to operate their businesses and are therefore genuinely unable to afford rent payments, some commercial landlords are not best pleased about the extension and are understandably dubious that some profitable commercial tenants who are in a position to continue paying their rent are exploiting the generosity of the scheme. Although the code of practice for the commercial property sector encourages best practice and the government has made it clear that any businesses able to pay their rent should continue to do so, there is no way to police it and there is no guarantee that this aid is not being abused.
With the UK Hospitality and British Retail Consortium reporting a combined rent debt of £5bn as at June 2021, it is perhaps no surprise that the government has stepped in with this additional support for the industry. The idea being that the extension will give businesses a realistic opportunity to recover from the grave effects of the pandemic before being hit with eviction notices. However, some may think the government has taken the easy option by only putting in place extra measures that will have no direct effect on the treasury itself whilst hitting some landlords hard.
It is worth noting that whilst the existing extensions are applicable to all businesses, the press release appears to indicate that the new Act of Parliament to be introduced will only provide recourse to those businesses which were impacted by closures during the pandemic. The press release specifically mentions that Landlords may have to waive some of the total amount of rent, which is a radical proposal. Landlords and tenants will be expected to liaise in the first instance to agree repayment plans and will be subject to a binding arbitration process in the event they are unable to do so. Importantly, any process will only apply to rent accumulated since March 2020 up until the date that the restrictions end, with recovery for any rent due before March 2020 and after the restrictions end immediately recoverable.
Whether these recent extensions and the new rules will be enough to allow the property industry to bounce back remains to be seen but commercial landlords who might feel that they have suffered enough will likely be counting down the days until they can get the enforcement processes rolling again.
If you have any questions relating to this issue or any other property dispute, please contact Russell May on [email protected]
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.