COVID-19 Rent Arrears: Ending protection for commercial tenants
Since March 2020, the Government has introduced various measures in response to COVID-19, which have given tenants a number of temporary protections to assist them during the pandemic.
The measures have included a suspension on taking possession of premises from tenants based on forfeiture for non-payment of rent, restrictions on the use of the statutory Commercial Rent Arrears Recovery scheme (CRAR) and the use of statutory demands to prevent landlords from presenting winding-up petitions. These temporary protections have been extended several times and are now, again, set to expire on 30 June 2021.
As the country gradually eases out of lockdown and with 30 June now in clear sight, the Government has issued a Call for Evidence in the form of a Consultation, to support its decision making on how to withdraw or replace the legislative protections afforded to tenants, whilst at the same time preserving tenant businesses. The aim of the Consultation is to understand better how the various parties, including tenants, landlords, lenders and investors are responding to the accumulation of rent arrears that have occurred as a result of the pandemic.
The Government also wants to learn more about how landlords and tenants have sustained an interim position on the payment of rent as well as compliance with other lease covenants. The use of the voluntary Code of Practice for the commercial property sector, which was introduced in June 2020, will also be considered.
The Consultation will be conducted by way of an online questionnaire. The primary focus is commercial property evictions and CRAR.
The various options for consideration under the Consultation are as follows:
- allow all of the current protections in place to expire on 30 June 2021;
- allow the moratorium on the use of forfeiture to expire on 30 June 2021, however retain the protections against insolvency and the restrictions on the use of CRAR;
- afford extra “protection” for businesses most affected by COVID-19 (e.g. hospitality), but restore landlords’ powers to pursue recovery of arrears in sectors which have been less affected;
- encourage formal mediation between landlords and tenants to resolve disputes;
- introduce a non-binding adjudication scheme, and
- introduce a binding non-judicial adjudication scheme.
The Consultation closes on 4 May 2021 following which the Government will provide feedback on the responses.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
‘Doing the right thing’ is at the heart of Freeths. Find out more about our excellent client service and the strong set of values that guide the way we work.
Talk to us
Freeths are a leading national law firm with 13 offices across the UK. If you have a query about our services or just want to find out more, why not give us a call?
Contact: 03301 001 014