The government has confirmed that the moratorium on carrying out commercial property lease forfeitures will be extended until the end of June. The restrictions surrounding the use of Commercial Rent Arrears Recovery (CRAR) have also been extended until the same date.
Many businesses have been unable to trade during the recent lockdown, particularly retail, leisure and hospitality sectors. The government decision is designed to protect those businesses that are struggling to pay their rent.
However, the latest extension has been met with anger from many of the country’s commercial landlords. The previous government extension to the lease forfeiture moratorium, which was due to expire on 31st March, had been billed as the final one.
The government is due to launch a review of the current commercial landlord and tenant legislation later this year. This will consider a number of issues, including the Landlord & Tenant Act 1954 Part II, the impact of coronavirus on the market and different models of rent payment.
Commenting on the news, Business Secretary, Rt Hon Kwasi Kwarteng MP said: “We’re doing everything we can to ensure businesses get the support they need to get through this pandemic and reopen when it is safe to do so.
“I know business owners will welcome this latest package of support and the breathing space it will give them to prepare for a safe reopening, and, ultimately, to build back better.”
Restrictions on commercial rent arrears recovery
As well as the extension to the ban on carrying out lease forfeitures, the government increased the restrictions around the use of the CRAR process. Up until 24th March 2021, commercial tenants need to owe at least 366 days rent before a notice of enforcement can be issued or goods taken into control.
However, between 25th March and 23rd June this increases to 457 days outstanding rent and from 24th to 30th June the figure will be 554 days. This is in line with the next two quarter rent days.
Problems for commercial property landlords
The government advice to commercial tenants and landlords throughout the coronavirus pandemic has been that those businesses who can afford to pay their rent should continue to do so. The restrictions surrounding lease forfeitures and CRAR are there to support those who have been impacted the worst by the lockdowns.
However, many landlords continue to raise the issue of those companies, many of them household names, who are still refusing to pay their rent in full.
Last year, the government published a Code of Practice which should be followed by both commercial landlords and tenants when coming to an agreement on rent repayments. The government has said that they are prepared to take further steps if these negotiations do not take place and jobs remain at risk.
They are calling for evidence on commercial rents to monitor the progress of negotiations between landlords and tenants. This will also set out the potential steps that could be put in place for after 30th June. This could include a phased withdrawal of the current restrictions, as well as legislative options designed to protect those businesses most affected by the Covid guidelines.
The British Property Federation said: “The scandal of those well-capitalised businesses who can pay rent, but have chosen not to, cannot be allowed to continue. Their behaviour has raided our nation’s pensions and savings invested in commercial property, and has been a heavy blow for already stretched local authority landlords and public finances.”
Retail and hospitality businesses, though, have welcomed the latest move by the government. With non-essential retail not due to open until at least 12th April and hospitality businesses in-line for a staged return to full opening, finances are not expected to be back to normal anytime soon.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Retailers have lost over £22 billion of sales during the three lockdowns, and the ban on aggressive rent enforcement is a vital protection against being pushed into administration by landlords.”