UK commercial tenants who are in rent arrears are to be given further protection until 31 March 2021.
The Coronavirus Act measures to protect commercial tenants and the new code of practice for landlords and tenants have been further extended from 31st December 2020 to 31st March 2021, giving tenants further breathing space to negotiate with their landlord.
The existing measures designed to protect tenants of commercial property from aggressive rent collection, potentially pushing viable businesses into insolvency are as follows:
• Temporary ban on forfeiture (evicting tenants) for non-payment of rent. The existing ban on forfeiture relates to commercial leases and is effective from 25th March 2020 until 31st March 2021. However forfeiture can be used as an enforcement measure in respect of breaches other than the non-payment of rent.
• Temporary ban on the use of statutory demands between 1st March and 31st March 2021 along with the temporary ban on winding up petitions presented from 27 April to 31 March 2021, where Coronavirus has had a financial impact on the tenant.
• Temporary ban on landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed at least 276 days of unpaid rent where notice of enforcement is given on or before 24th December 2020 (rising to 366 days unpaid rent for notices issued after 24th December 2020). This restriction currently applies until 31 March 2021.
The measures provide much needed relief for some tenants although may adversely impact many commercial landlords who continue to have fewer remedies to pursue rent arears. In practice, it will be very difficult for a landlord to demonstrate that Coronavirus has not had an adverse effect on a commercial tenant and therefore use the threat of winding up to encourage payment of rent including arrears.
Whilst these restrictions remain in place, tenants who are in a position to pay rent are expected to do so.
It is important for tenants to recognise that these measures only serve to defer payment of rent and service charges. The concern is that with further extensions, this is creating a potentially larger cliff edge of 31st March 2021 when tenants will have to pay these deferred liabilities unless further legislation is enacted to provide a mechanism for gradual payment of rent arrears.
Whilst these measures bring options and flexibility for tenants, we recommend that tenants take legal advice if they have any concerns and also consider alternative options such as negotiating rent holidays or a switch from quarterly to monthly rent payments.
If you have concerns regarding the financial impacts of Coronavirus on your business and/or its ability to pay rent arrears, please contact us for a no obligation consultation to explore your options.