Commercial Property Disputes specialist, Mike Hansom, considers the package of measures announced by the government to help business tenants chart a path out of lockdown. Mike is available by email, or you can call him on 01225 462871.
The government’s moratorium on commercial evictions, which was due to end on 31 March, has been extended again, this time to 30 June 2021. The extension forms part of a package of measures, including extending the job support scheme and business rate relief, to help businesses chart a path out of lockdown.
While extending the eviction ban provides welcome breathing space for thousands of businesses, it does little to address the billions of pounds of unpaid rent on commercial premises, much of it across the hospitality, leisure, and retail sectors. Helen Dickinson, chief executive of the British Retail Consortium, said:
“After months of lockdown, this announcement provides much-needed breathing space to retailers impacted most by the pandemic, many of which are sitting on rising rent liabilities. Retailers have lost over £22 billion of store sales during the three lockdowns, and the ban on aggressive rent enforcement is a vital protection against being pushed into administration by landlords. Where new rent plans have not yet been agreed, tenants and landlords must use this final opportunity to reach a deal before 30 June.”
The trade body, UKHospitality, which recently warned that around forty per cent of hospitality businesses had not reached an agreement on rent reductions or deferrals, has welcomed the announcement. Their chief executive, Kate Nicholls, said:
“Extending the moratorium is a sensible and positive step by the Government. It was really the only option for businesses that are on the brink of reopening but have piled up so much rent debt over the past year.”
“It is even more encouraging to see the Government issuing a call for evidence on the possibility of additional measures to solve the rent crisis. Rent debt has spiraled to unmanageable levels for too many businesses through no fault of their own. We have reached an impasse that threatens the survival of many businesses right at the moment that they are looking to reopen and rebuild.”
Code of practice for the commercial property sector
While making it clear that any businesses that can pay all or any of their rent should do so, the government’s position to date has been to support and encourage commercial landlords and tenants to reach agreement for paying or writing off arrears of rent. In June 2020, they published a code of conduct, setting out best practice for these negotiations.
However, the government has now recognised that these discussions are not happening in many cases, putting tens of thousands of jobs at greater risk. They have therefore announced their intention to play a more proactive role, “launching a call for evidence on commercial rents to help monitor the overall progress of negotiations between tenants and landlords.”
The government will also set out in early course the potential steps they could take after 30 June, ranging from a phased withdrawal of the current protections to legislation targeted at those businesses most impacted by the pandemic.
Review of Landlord & Tenant Act 1954, Part II
In addition, they have announced a “review of commercial landlord and tenant legislation” to begin later this year which “will consider a broad range of issues including the Landlord & Tenant Act 1954, Part II, different models of rent payment, and the impact of Coronavirus on the market.”
Part II of the 1954 Act covers security of tenure for business tenants in England & Wales.
Commercial Rent Arrears Recovery (CRAR)
The Ministry of Justice will also introduce a Statutory Instrument extending the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords. CRAR allows commercial landlords to recover rent arrears by taking control of a tenant’s goods and selling them. The current restriction ends on 31 March and will be extended until 30 June 2021. This measure will increase the total number of days of outstanding rent required for CRAR to be used to 457 if CRAR is to be used between 25 March and 23 June, increasing to 554 days if it is to be used between 24 and 30 June.
The government has so far not confirmed whether they will extend the measures introduced by the Corporate Insolvency and Governance Act 2020, restricting the use of statutory demands and winding-up petitions which are also due to expire on 31 March.