The government’s response to the coronavirus crisis is constantly changing and this includes the action that commercial landlords can take against tenants for rent arrears. An announcement at the end of last week stated that new legislation would be brought in to protect tenants who are struggling during this time.
On 23rd April, the Government stated that the Commercial Rent Arrears Recovery (CRAR) process will only be able to be used if the commercial tenant owes at least 90 days of rent. The basis of these changes is to offer support for those businesses in the country who are suffering significant cashflow problems because of the coronavirus pandemic. We are yet to see the full details of what will be covered by the legislation, but it will reduce the number of enforcement notices that can be sent out for rent arrears.
Research carried out by Remit Consulting shows the extent of the problem for commercial landlords in the country. Data concerning over 18,000 properties, highlights that only 67% of rent had been received by landlords 21 days after March’s rent quarter day. For the retail sector, the figures for quarter rent paid was even lower. Only 54% of rent had been collected from retail sites after 21 days. This problem is expected to escalate for rent due in June, as more businesses feel the financial effects of the lockdown.
Senior Consultant at Remit Consulting, Steph Yates, said: “Despite the hard work by property managers, there was only a marginal uplift in the rent and service charges being paid by tenants after 21 days. While there is anecdotal evidence of an increase in the number of commercial occupiers moving to monthly payment plans, which indicates a change in behaviour, we are not seeing any major uplift in collection rates. This is concerning and property managers and landlords are already worrying about the June Quarter day, particularly as the quarterly payments were due only a few working days after the lockdown was put in place by the government.”
Service charge arrears
The updated legislation only covers the rent element of commercial properties. However, alongside this many commercial landlords are also owed substantial amounts of service charge arrears. Information from Remit Consulting shows that across both commercial and residential properties only 56% of service charges had been paid three weeks into the quarter. This dropped to 45% in the retail sector.
As these cannot be collected under the CRAR process, we are still able to start the recovery of these debts. Where a commercial landlord has invoiced these service charge costs to the tenant, we can recover these debts free of charge. The fees can be added onto the tenant, providing you with the potential of some cashflow during this period.
Forfeiture of leases
At the start of the coronavirus crisis, the government announced a stay on lease forfeits for rent arrears until at least 30th June 2020. Forfeiture can still take place for other breaches of the lease, but the tenant will need to be provided with a notice period first.
Support for commercial landlords
At The Bailiff Company, our team are working hard during this period to offer advice and support for commercial landlords hit by the coronavirus lockdown. We are keeping fully abreast of the changes that are being introduced, so we know exactly what action can be taken. To discuss your particular situation, contact us today on 0113 532 8350 or email office@bailiffcompany.co.uk.
More information
Commercial rent during coronavirus crisis – FAQs
Coronavirus – Options available to commercial landlords
Keeping your business secure during the coronavirus crisis