Commercial landlords face extended restrictions

18 Jun 2021

Commercial landlords are being asked to shoulder an even greater ‘pandemic’ burden with the Government announcing that the breathing space provided to business tenants in March last year will be extended by a further nine months.
 
The Government has announced its intention to:
  1. Extend the ban on forfeiture of business tenancies for non-payment of rent until after 25 March 2022;
  2. Extend the restrictions on the use of Commercial Recovery Arrears Recovery (CRAR) until after 25 March 2022;
  3. Extend the restrictions on statutory demands and winding up petitions until after 30 September 2021; and
  4.  Introduce a new Act of Parliament to deal with the accrued rent arrears of businesses that had to shut during the pandemic.
’Forfeiture’ enables a landlord to take steps to terminate a tenancy where a tenant has defaulted on its obligations under a lease. In the case of rent arrears, landlords have had their hands tied since March 2020, and this looks set to continue for some time. Great news for business tenants, and particularly welcomed by the hospitality and retail sectors, but not so good for landlords who are missing out on a vital income stream.
 
The Government’s press release states that:
 
“The existing measures in place to protect commercial tenants from eviction will be extended to 25 March 2022. This is to ensure that the sectors who are unable to open have enough time to come to an agreement with their landlord without the threat of eviction.”
 
Whilst the inference that the extension to restrictions will be for sector specific industries that have been hit the hardest (eg. hospitality), in practice the restrictions will continue to apply to all businesses and all industries.
 
A landlord’s use of CRAR has also been curtailed since March 2020 and this looks set to continue also with the restrictions currently providing that:
  • if a notice of enforcement is given, or where goods are taken control of, on or before the 23 June 2021, then 457 days' rent must be in arrears;
  • if a notice of enforcement is given, or where goods are taken control of, on or after 24 June 2021, then 554 day's rent must be in arrears.
In terms of the new legislation announced designed to “ringfence” arrears, there is a clear expectation from the Government that landlords "share the financial impact" of the pandemic with their tenants. To do this, we understand that the new legislation will be designed to help parties to come to an agreement regarding arrears through a "binding arbitration process". 
 
We are still awaiting further detail on this and some important questions remain:
  • When will this come into force?
  • What exactly does “ringfence” mean? How far does it extend?
  • Will protection only be contained to certain sectors as suggested in the press release?
  • What are the proposed arbitration guidelines?

Finally, it has also been announced that further changes are on the way, with the expected review of commercial landlord and tenant legislation later this year - including consideration of issues under the Landlord and Tenant Act 1954 and different models of rent payment. Landlords may feel understandably nervous about the outcome of this review - especially given the drastic changes being proposed to the residential tenancy sector.
 
Many in the industry will be forgiven for feeling that they have more than enough to contend with at present.
 

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