The Government has announced that new rules will be introduced to ringfence commercial rent arrears arising from the pandemic, and to guide tenants and landlords to agree repayment plans. In the meantime, commercial tenants will continue to be protected from eviction until the new rules come into force.
With many businesses, particularly those in retail and hospitality, still struggling to recover from the pandemic, MHCLG Secretary Robert Jenrick has announced new measures. The proposals, which have been developed after consultation responses from businesses, landlord groups, lenders, and investors, are designed to support businesses to reopen while allowing commercial landlords to continue to operate.
The new measures include:
Ringfencing pandemic-related rent arrears
Legislation will be introduced to ringfence outstanding unpaid rent that has built up when a business has had to remain closed during the pandemic. Landlords are expected to make allowances for the ringfenced rent arrears from periods of closure forced by the pandemic and to share the financial impact with their tenants.
Tenants and landlords will be expected to work together and reach an agreement regarding the money owed. Options proposed include potentially waiving some of the amount due or agreeing a longer-term repayment plan.
When an agreement cannot be made, the Government proposes to introduce a legally binding arbitration process to ensure a formal agreement.
Rent repayments
In order to ensure landlords are protected, the Government has made clear that businesses who are able to pay rent, must do so. Tenants should start paying their rent as soon as restrictions change, and they can reopen.
Extension on protection from evictions
The existing measures which are in place to protect commercial tenants from eviction will be extended to 25 March 2022. This is to ensure that businesses in sectors which are unable to open have enough time to come to an agreement with their landlord without the threat of eviction.
Extended restriction on statutory demands and winding up petitions
Statutory demands and winding up petitions will remain restricted for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.
How we can help
Our advice to landlords is to seek legal guidance before you commence negotiation or commit yourself to any particular course of action.
The use of debt recovery proceedings may also be a route to recover rent that you are owed, (see this article on recent High Court cases) , so it is important that you understand all of the options available.
For further information about the current rules around the recovery of commercial rent arrears, please contact Sanjay Chandarana on 020 7845 7400 or via email at sanjaychandarana@iwg.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.