The government has confirmed that the lease forfeiture moratorium will be extended until 25th March 2022. The restrictions on the use of the Commercial Rent Arrears Recovery (CRAR) process will also be extended until this date.
Before this date, the government is set to introduce new rules which will ringfence Covid-19 commercial rent arrears. Both tenants and landlords will be encouraged to agree their own repayment plans for these debts.
Lease forfeiture ban extended
The ban on the use of forfeits for rent arrears had been due to come to an end on 30th June. However, the government has decided that in order to protect businesses, as they recover from the coronavirus pandemic, it needs to prevent landlords from evicting them.
This will provide tenants with breathing space to enable them to start recovering from the lockdown restrictions before new rules are brought in.
To offer protection to landlords, businesses are being told by the government that where they can pay their rent they must do so. For those that remain closed, as soon as restrictions change and they can open, tenants should start to pay their normal rent.
The restrictions on commercial property evictions will be in place until 25th March 2022. This will provide time for businesses in sectors that have been unable to open to come to agreements with their landlord.
New legislation to be announced
Communities Secretary Robert Jenrick has announced that new legislation will be brought in before the new extension expires. This will separate the rent arrears that were built up during the time businesses, including those in the hospitality and retail sector, were forced to close. The government expects landlords to share the financial burden of these arrears with their tenants and come to some agreement on repayment.
The new legislation will make both parties work together and solutions could include long-term repayment plans or agreeing to waive some of the rent arrears. Where agreements cannot be reached between landlords and tenants, there will be a binding arbitration process in place. This will be a legally binding agreement, with both parties having to adhere to it.
Communities Secretary Robert Jenrick said: “We have provided unprecedented support to businesses to help them through the pandemic. However, as we continue to lift restrictions and start to return to business as usual, tenants and landlords should be preparing to pay rent or come to an agreement if they have not done so already.
“This special scheme reflects the unprecedented nature of the pandemic and responds to the unique challenges faced by some businesses. It strikes the right balance between protecting landlords while also helping businesses most in need, so they are able to reopen when it is safe to do so.”
Kate Nicholls, UKHospitality’s CEO, said: “We welcome these measures as they will banish a grim shadow that has hung over hospitality since the Covid crisis began. This legislation will form a strong bedrock for negotiated settlements that can help heal the damage that the pandemic has wrought, and we are pleased that the government has listened to our sector, and acted to ease its plight by bringing in an equitable solution where both landlords and tenants share the pain.”
Commercial Rent Arrears Recovery
The restrictions on when commercial property landlords can begin the CRAR process have also been extended by the Ministry of Justice. The total number of days’ outstanding rent before this can be used will remain at 554 days. From 17th July 2021, this means that rent arrears outstanding from at least the middle of December 2019 will be eligible for CRAR.
This has been designed to provide protection for commercial property tenants with rent arrears that have built up during the Covid-19 pandemic.
The use of statutory demands and winding up petitions will also remain restricted for another three months to protect companies with pandemic-related debts from enforcement action.