Updated 17 June 2021 - On 16 June 2021 the Government confirmed that the evictions ban on commercial tenants for non-payment of rent will be extended again until the 25 March 2022 and a new piece of legislation to boot
This further extension of the commercial tenant evictions ban will help those worst affected by the pandemic, such as bars and restaurants, who are still suffering due to ongoing restrictions, due to reduced capacity and some venues not being able to open some 16 months on and being forced to close.
In an effort to lessen financial pressure on tenant businesses, the Government has also extended the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords until 25 March 2022. This measure does not, it seems, increase the total number of days' outstanding rent required for CRAR to be used, namely:
• 457 days (between 25 March 2021 and 23 June 2021), and
• 554 days (between 24 June 2021 and 30 June 2021).
The Government is also planning on introducing a new Act of Parliament to deal with the accrued arrears of businesses forced to close during the pandemic – effectively forcing landlords to agree on a payment plan with their tenants who have been forced to close through COVID or be thrust into an arbitration process where an agreement may be imposed upon them.
Can commercial tenants be evicted?
No, the commercial eviction ban means that tenants cannot be evicted for non-payment of rent until 25 March 2022. However, this only applies to disputes regarding rent arrears. If a commercial tenant is in breach of the covenants in their lease, the landlord may still take action against them (and the outcome could include forfeiture of the lease).
We help commercial landlords and tenants to resolve property disputes fairly and with commercial objectives in mind, whether this relates to non-payment of rent or breach of covenant – get in touch to find out how we can support you.
How will the business evictions ban extension help tenants?
The commercial evictions ban extension will continue to provide a much-needed lifeline for those businesses still struggling, particularly those in the hospitality sector, helping them get back on their feet after months of restrictions and closures.
However, it is important to stress that this extension will only delay the landlord’s rights; it does not affect a landlord’s right to forfeiture after the March 2022 extension ends and commercial tenant evictions will once more be possible from this point onwards. The new act of parliament is essentially creating a ring fence around accrued debt during periods of closure and businesses are being encouraged to prioritise new and future rent.
As a landlord, is there anything I can do about the commercial evictions ban?
Many commercial landlords have shown flexibility, understanding and commitment to protecting businesses during an exceptionally challenging time. However, with yet another delay, the extension of the commercial evictions ban will significantly impact their own cash flow in some cases.
It is important that landlords use upcoming months to assess their position and seek to resolve the matter with their tenants. At the moment, there is little detail on the proposed new act and no date given as to when it will come into being, so for some this will mean continuing to issue proceedings at court for debt claims of arrears accrued before being forced into arbitration.
But for many others, continuing to negotiate with their tenants to reach an agreement on unpaid rent may be the most commercially astute way forward (particularly if the alternative is to force the tenant into an insolvency situation). Either way, landlords would be well advised to grasp the nettle now, as doing nothing is not a helpful strategy.
If a negotiated solution is reached, it’s important to remember that:
- any voluntary arrangements, including monthly rent payments or rent holidays, are properly and legally documented to protect both parties;
- new agreed terms are clear and binding and do not prejudice any other lease provisions; and
- the arrangements do not require either a lender or bank consent.
We’re here to help
Our commercial property disputes team can help you through these difficult situations and guide you towards a solution - contact James Fownes, Martin Edwards, Justine Ball or another member of the property disputes team, for advice and support.
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