The government has continued the moratorium on evictions from commercial properties until the end of the year. It has also increased the support for tenants by extending the restrictions on the use of the Commercial Rent Arrears Process (CRAR).
The existing arrangements, which had already been extended in June, were due to expire on 30th September. However, now landlords will not be permitted to forfeit leases on commercial properties until at least the start of 2021.
The changes will provide support for those companies most in need and remove the threat of eviction over the Christmas period. It covers the next two quarter’s rent due dates – 29th September and 25th December. Businesses can now focus on rebuilding their finances for the start of 2021.
Announcing the changes to the legislation, Secretary of State for Housing Robert Jenrick MP said: “… we are extending support to protect those businesses that are unable to pay their rent from eviction to the end of the year. This will stop businesses going under and protect jobs over the coming months.
“This government is committed to supporting businesses and our high streets at this difficult time, and this extension of support will help businesses recover from the impacts of the pandemic and plan for the future.”
Support for businesses
The government has made it clear to businesses that can afford to pay their rent in full and on time that they should do so. This additional support is aimed at those companies who have been financially affected the most by the pandemic.
In June, the government published a Code of Practice for both commercial landlords and their tenants. This sets out how both parties should work in negotiating rent payments where businesses are struggling.
Business Secretary Alok Sharma said: “During this particularly challenging time for businesses, it is crucial that both landlords and tenants have the clarity and reassurance they need to build back better from the pandemic.
“Extending the temporary measures we put in place earlier this year to protect businesses from the threat of eviction will give them some much-needed breathing space at a critical moment in the UK’s economic recovery.”
Changes to Commercial Rent Arrears Recovery
The government has also set out amendments to The Taking Control of Goods (Coronavirus) Regulations 2020. This applies to landlords looking to use the CRAR process to collect unpaid rent.
Between 29th September and 24th December 2020, the equivalent of 276 days rent must be owed before a notice of enforcement can be issued or goods taken into control. From 25th December 2020, the amount of rent arrears required will rise to 366 days.
Currently, the legislation sets out that 189 days rent must be owed before the CRAR process can start. This was increased from 90 days in June.
Difficulties for landlords
Many commercial landlords are already struggling with a reduction in rental income. This further extension to the moratorium could result in further financial hardships and difficulties in paying mortgages.
Revo, the industry body representing commercial landlords, has highlighted that there is already a £1.5bn shortfall in rents for the second quarter of 2020. With the next quarter’s rent due at the end of this month, this figure is expected to rise sharply.
Vivienne King, chief executive of Revo, said: “We have repeatedly explained to Government how the moratoriums are being enjoyed by major financial businesses which they were never intended for.
“A short-term emergency measure aimed at genuinely vulnerable operators is being exploited to preserve cash flow by major high street chains who will only prolong the pain of high street recovery and unseat the Government’s own levelling up agenda.”
This sudden loss of income will reverberate through the financial system to savers and pensioners that directly or indirectly rely on commercial property for income and may begin to have material impacts on credit supply, if lenders find themselves overwhelmed by defaulting landlord borrowers. The current situation is simply not sustainable.”
More information:
Almost half of commercial rent paid within 30 days
June quarter commercial rent collections continue to increase