Since March 2020, there has been commercial property coronavirus legislation in place to support tenants through the pandemic. However, this has made it increasingly difficult for commercial landlords to collect unpaid rent or to carry out lease forfeits.
There is currently a moratorium in place on lease forfeitures for rent arrears until 25th March 2022. Until the same date there are restrictions on the use of Commercial Rent Arrears Recovery (CRAR).
Code of Practice
The Government has introduced a Code of practice for commercial property relationships following the Covid-19 pandemic. This indicates how both landlords and tenants should act during negotiations over rent arrears.
Where possible, tenants should meet the obligations of their rental payments in full, but those viable businesses should be allowed to continue trading where this doesn’t come at the detriment to the landlord’s solvency.
Before the end of the commercial property coronavirus legislation restrictions, the Government will bring in the Commercial Rent (Coronavirus) Bill. This will include an arbitration process for commercial landlords and tenants that will be legally binding, where agreement on the repayment of debts has not been reached.
Changes to commercial property coronavirus legislation
This week the Government announced that Covid restrictions would be coming to an end in England as part of their Living with Covid-19 Plan. They had always made clear that restrictions would not remain in place a day longer than was necessary. The timescale has now been announced for removing the remaining domestic restrictions.
Within the Living with Covid-19 Plan it states that all remaining non-devolved temporary provisions made within the Coronavirus Act 2020 will expire. There are 20 remaining non-devolved temporary provisions and 16 of these will now expire at midnight on 24th March 2022. This includes Section 82, which relations to protection from forfeiture for business tenancies in England and Wales.
Commercial Rent Arrears Recovery
The use of the CRAR process has also been restricted since March 2020. Currently commercial tenants need to owe at least 554 days rent before CRAR can be started. This is in place until 25th March 2022, unless the Commercial Rent (Coronavirus) Bill is passed before this date.
Once the current protections are replaced by the new arbitration process, commercial landlords will be able to exercise their standard enforcement rights as they did prior to the start of the pandemic. This will apply as long as the arrears are not in the scope of the arbitration process, including any ring-fenced period.
This means that action can be taken on any rental arears built up prior to March 2020 and any from the end of the ring-fenced period. The CRAR process can also be used for tenants whose businesses fall outside of the arbitration process, such as those who weren’t ordered to close during the pandemic.
Details of the ring-fenced periods for specific business sectors can be found in the Code of Practice.
Support for commercial landlords
At CEA Limited, we have been working with commercial property landlords throughout the pandemic to come to agreements with their tenants.
If you are looking to start CRAR or lease forfeiture procedures once the restrictions are eased, contact our commercial property team to find out more. Email office@cealimited.co.uk or call us on 0113 532 8350. We have enforcement agents across England and Wales.
More information
How to use the Commercial Rent Arrears Recovery (CRAR) Process