In light of the coronavirus lockdown restrictions and the impact this has had on UK businesses, the Government has today (19th June) announced an extension on the moratorium on lease forfeitures until the end of September.
They have also developed a new code of practice, in conjunction with leaders from the retail, hospitality and property sectors, to offer clarity to businesses when negotiating rental payments and to encourage best practice from all parties.
Suspension of lease forfeitures
Initially, the government had put a ban on landlords evicting commercial tenants due to rent arrears until 30th June. However, because of the financial difficulties still being felt by many companies, this suspension has now been extended until 30th September.
This prevents any commercial landlord from evicting their tenants because they have missed one or more rental payment. It will come as a relief for many businesses, particularly those in the retail, leisure and hospitality industries, who have been unable to trade for many weeks.
With the next quarter rental payment coming up next week, many were becoming increasingly concerned about their ability to pay. This will provide high street businesses with protection over the summer months and enable them to plan for their recovery.
Commercial Rent Arrears Recovery (CRAR)
The government has also confirmed that they will bring in secondary legislation to prevent landlords from starting the CRAR process until a tenant owes at least 189 days of rent. This measure will be in force from 30th June to 30th September.
Earlier in the coronavirus pandemic, this figure had already been extended to 90 days.
Communities Secretary, Rt Hon Robert Jenrick MP said: “As our high streets come to life and our town centres open for business, it is crucial that both landlords and tenants have clarity and reassurance as they seek to keep their finances stable and bounce back.
“That is why we are extending measures to protect those who are unable to pay rent from eviction so that businesses have the security they need to plan for their futures.
“And in recognition of the strain that the virus has had on our high streets, our new code, backed by leaders across the industry, will help unlock conversations on rent and future payments whilst ensuring best practice is displayed across the board as we confront the challenges of this pandemic.”
New code of practice
The new code of practice for the commercial property sector has been developed to encourage landlords and tenants to work together to protect viable businesses. The voluntary code is relevant to all commercial leases held by businesses where they have been affected by the coronavirus pandemic.
Where tenants are able to pay their full rent, or part of it, the code encourages them to do so. Landlords are advised to support their tenants in any way that they are able to, in order to prevent companies from closing.
It recognises the impact that coronavirus and the lockdown restrictions have had on business finances, including those of both tenants and landlords. It encourages both parties to act responsibly and be transparent when negotiating rental payments.
Jane Gratton, Head of People Policy, British Chambers of Commerce said: “The pandemic has created severe cashflow problems for many SMEs, who will need time to rebuild and recover. This code will help landlords and tenants to work together constructively to find solutions that keep businesses open and people in work.”
Support for commercial landlords
UK Finance has confirmed the ongoing support of the banking and finance industry for commercial landlord customers, as they try to help them through these financial difficulties. This includes amendments to current facilities and capital payment holidays.
Stephen Jones, Chief Executive of UK Finance, said: “Commercial finance providers are working hard to support business customers through these difficult times and lenders recognise that the current situation poses particular challenges for commercial landlords and their tenants.
“A wide range of flexible support is available, including amendments to facilities and capital payment holidays to help landlords and their tenants manage through the disruption.
“As part of the support being provided ahead of the June quarter day all the main commercial lenders are proactively contacting their major commercial landlord borrowers to identify concerns they have and provide support where appropriate.”
Ban on statutory demands and winding up petitions
An amendment to the Corporate Insolvency and Governance Bill has been tabled to extend the ban on the use of statutory demands and winding up petitions for companies affected by coronavirus until 30th September.