Commercial Property specialist, Caroline Entwistle, considers the troubled retail sector, as current protections for commercial tenants are set to end on 30 June.Our Commercial Property and Commercial Property Disputes Teams are available on 01225 462871. You can also contact them by email, or by completing the Contact Form at the foot of this page. |
While the increasingly used phrase, ‘retail apocalypse’, might seem a little dramatic, no one can deny that the one in seven empty retail units in our town centres are of considerable concern. And they form only the first chapter in a still-unfolding story.
Rent moratorium
Calendars around the country will have been turned yesterday to reveal a circle around 30 June, the date after which commercial landlords in England hope to be able to reassert some control over their premises. Until then, a landlord’s options when faced with non-payment of rent remains limited by:
- the moratorium on forfeiture;
- a restriction on the use of Commercial Rent Arrears Recovery (CRAR) – currently, it can only be used where tenants owe at least 457 days’ rent between 25 March and 23 June 2021, and 554 days’ rent between the 24 and 30 June 2021;
- a temporary ban on issuing winding-up petitions where the inability to pay debts is caused by COVID-19.
Call for evidence
But 30 June may not see the end to landlords’ frustrations – or indeed hope for tenants – as, “faced with a ‘tsunami’ of store closures“, the government has been actively seeking views on the next steps for withdrawing or replacing these measures.
British Retail Consortium
One thing is for certain though, lockdown has led to stratospheric levels of rent arrears across the retail sector. According to the British Retail Consortium (BRC), accumulated rent debt currently stands at an eye-watering £2.9 billion, and they estimate that a staggering two-thirds of retailers have been told by their landlords they face enforcement action at the end of this month.
Around 30% of retail tenants say they have already faced County Court Judgements over rent arrears, and 80% say that landlords have given them less than a year to pay their arrears or face forfeiture.
Code of Practice
Last year, the government introduced a Code of Practice aimed at dealing with outstanding rent debt issues. Unfortunately, two-thirds of retailers surveyed describe the Code as ‘ineffective’ due to its voluntary nature. The BRC said the government must give the Code greater weight, in addition to taking other measures to support both tenants and landlords. They believe these measures should include:
- ringfencing rent arrears that have accumulated during the pandemic and extending the moratorium in respect of these arrears until the end of the year;
- extending the protections on these rent debts to include County Court Judgements;
- introducing compulsory arbitration from 1st January 2022, using the Code of Practice “to give teeth to this otherwise weak process”.
Watch this space…
