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Insights // 18 June 2021

COVID-19: Update on Commercial Rent Arrears and Forfeiture

Solicitor Asma Muneer, in our Dispute Resolution team, discusses the further support for commercial tenants announced by the Government, that may come as bad news for some commercial landlords.

On 16 June 2021, the Government issued a press release announcing further support for commercial tenants. The news came ahead of the 30 June 2021 deadline by which the current restrictions were due to be lifted, a move that has been eagerly awaited by many landlords.

Restrictions that will continue

The restrictions on forfeiture of business tenancies for non-payment of rent are to continue in England until 25 March 2022, a further nine months. The Government stated that this extension is in order to protect tenants from eviction, giving them the breathing space they need and help to protect jobs. The restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords will also be extended. The total number of days’ outstanding rent required for CRAR will remain at 554 days. This measure will continue to provide protection to tenants of commercial leases with rent arrears accumulated during the Coronavirus period, while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020. Statutory demands and winding up petitions will remain restricted for a further three months to protect companies from creditor enforcement action where the companies' debts relate to the pandemic.

New legislation to come in to force

As mentioned in our previous blog article, ‘COVID-19 - Update on Commercial Landlords’ Ability to Recover Rents’, the call for evidence consultation by the Government during April/May 2021 included an option which could see landlords and tenants forced into agreeing the level of debt between them. The Government has now announced that primary legislation will be introduced to “ringfence” rent arrears that have built up due to a business having to remain closed during the pandemic. Landlords and tenants will be required to come to an agreement on the treatment of the arrears. For example, landlords waiving some of the amount due or agreeing a longer-term repayment plan, compelling landlords to share the financial impact with tenants and to encourage them to work together. If agreement cannot be reached, a binding arbitration process will be put in place that ensures a legally binding agreement is made to which both parties must adhere. The Government repeated its intention to carry out a review of commercial landlord and tenant legislation, including Part 2 of the Landlord and Tenant Act 1954, later this year.

The rationale

The above measures have been announced in an attempt to respond to the challenges faced by businesses in this unprecedented time of the pandemic but will no doubt come as a blow to many commercial landlords.

The Government aims to ensure that businesses can continue to operate whilst debts which have been accrued are resolved with mutual agreement between landlord and tenant. Extending the ban on commercial evictions has been deemed a necessary measure to help businesses through what are hopefully the final stages of the pandemic, as part of the £350 billion package committed by the Government in support of businesses and jobs.

If you are a landlord or tenant who is concerned about the impact of the above measures on you/your business, our specialist Dispute Resolution team can advise you on your options.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800. 

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Asma Muneer

Asma Muneer

Solicitor, Dispute Resolution

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