Government announces legislation to further protect commercial tenants and potentially force landlords to waive some arrears
Last week, the government announced plans to offer additional support to commercial tenants most financially affected by forced business closures during the pandemic. The recent proposals call for a further 9-month extension of existing restrictions first imposed on commercial landlords in March and April last year, preventing them from taking forfeiture and eviction action against tenants with debts of commercial rent.
The government introduced various protective measures last year and current plans will see existing plans end in March 2022 with the government:
- Extend restrictions preventing landlords from using the Commercial Rent Arrears Collection (CRAR) process.
- Continuation of protection currently provided that prevents forfeiture of commercial leases due to rental debt.
- Introduce new rules to ‘limit’ commercial rent arrears (related to Covid only) and force business owners and tenants to work together to agree longer-term repayment plans.
In addition to the above, the government is also extending the various insolvency measures introduced as part of the government’s plans to help businesses recover from their sudden and prolonged inability to earn income. These include an extension of the current restrictions on making legal claims and liquidation requests for pandemic-related debts, but for an additional 3-month period only, until September 30, 2021.
The government-led initiative to prevent evictions has already been extended a few times since the early days of the pandemic, but was due to end on June 30, 2021, following the early removal of remaining pandemic restrictions this week. The Prime Minister’s late postponement of this withdrawal has caused the government to reconsider and although welcomed with open arms by desperate tenants for more time to recuperate, this additional lifeline of another 9 months of relief has received some reviews from the British Property Federation and other voices within the real estate industry.
While it is admitted that some commercial tenants have not been able to operate their business and therefore are genuinely unable to pay the rent, some commercial landlords are not very happy with the extension and understandably doubt that some profitable commercial tenants who are able to continue paying their rent are exploiting the generosity of the scheme. Although the code of conduct for the commercial real estate industry encourages best practice and the government has made it clear that any business capable of paying its rent must continue to do so, there is no way to control it and there is no guarantee that this aid will not be abused.
With the UK Hospitality and British Retail Consortium declaring a combined rent debt of £ 5bn in June 2021, it may not be surprising 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 severe effects of the pandemic before being hit with eviction notices. However, some may think that the government has taken the easy option of putting in place only additional measures that will have no direct effect on the cash flow itself while hitting some homeowners hard.
It should be noted that while the existing extensions are applicable to all businesses, the press release seems to indicate that the new law of parliament to be introduced will only provide a remedy for businesses that have been affected by the closures during the pandemic. The press release specifically mentions that landlords may have to forfeit part of the total rent, which is a drastic proposition. Landlords and tenants will need to work together to agree repayment plans first and will go through a binding arbitration process if they are unable to do so. It is important to note that any process will only apply to rents accrued from March 2020 up to the end of restrictions date, with the recovery of any rent due before March 2020 and after the end of restrictions being immediately recoverable.
It remains to be seen whether these recent expansions and the new rules will be enough to allow the real estate industry to rebound, but business owners who might think they’ve suffered enough will likely be counting the days until they can revive them. application process. .