Covid-19: commercial premises update
The coronavirus pandemic, and the necessary restrictions the Government introduced in the commercial property sector, represent unprecedented times for both tenants and landlords. Whilst the majority of these restrictions have now being lifted, we know that the economic disruption of Covid-19 will continue to be felt for some time.
On 16th June 2021, the Government announced their update in respect of business tenancies. The update included:
Extension of existing protective measures in place for commercial tenants
Following the passing of the Coronavirus Act 2020, from 26th March 2020, landlords have been prohibited from taking the usual steps to forfeit a lease and evict their tenant due to rent arrears. This suspension has been extended until 25th March 2022.
The Government has remained clear that rent remains payable and tenants who are able to pay their rent in full should continue to do so, whilst those businesses that cannot pay in full should communicate with their landlord and pay what they can. Landlords should also provide support to businesses if they are able to do so.
It is envisaged that from the 26th March 2022, landlords will once again be able to forfeit business leases and recover commercial premises as a result of rent arrears.
However, landlords and tenants are reminded that the restriction applies to forfeiture for non-payment of rent only. Landlords can take the necessary steps to forfeit for other breaches of lease.
Ring-fenced rent arrears
The Government announced its intention to introduce new legislation to ring fence unpaid rent which accrued as a result of business closures due to the coronavirus pandemic. The aim is for the legislation to assist landlords and tenants to reach an agreement in respect of the monies owed and for circumstances where the parties cannot come to an agreement themselves, to provide a binding arbitration process.
This indicates the Government’s intention that landlords will be expected to make allowances for this debt and share the financial burden of the pandemic with their tenants. The suggestion is that this new legislation will only be applicable to those business tenants impacted by closure.
Extension on commercial rent arrears recovery (CRAR)
An alternative remedy to forfeiture, in respect of rent arrears, is CRAR. This is a statutory procedure enabling a commercial landlord to recover rent arrears by taking control of goods owned by the tenant, and selling them.
As a result of the pandemic, a restriction is currently in place in respect of the CRAR process available to landlords which means that landlords cannot use the CRAR process until 554 days’ rent has accrued. This restriction will remain until 25th March 2022.
Extension on statutory demands and winding up petition
For landlords pursuing the debt owed to them, the restriction on the service of statutory demands and winding-up petitions were also extended for three months.
It is envisaged that from 26th March 2022, landlords will once again be able to forfeit business leases and recover commercial premises as a result of rent arrears. Realistically, at present, a landlord’s only real method of enforcement is a debt claim for the arrears, which will involve taking the tenant to court. This is currently still lawful, but landlords should consider the merit of court proceedings as it can be costly, and they could potentially be left with an empty unit which, in the current climate, may be difficult to fill.
It is certainly a difficult time for both commercial landlords and business tenants, both facing the impact of the pandemic.
Contact our landlord and tenant solicitors in Bristol
The law around commercial premises is complex, and there have been numerous changes to keep on top of in recent months. Whether you are a commercial landlord or tenant, for straightforward, practical advice, contact our property litigation solicitors by calling 0117 325 2929 or fill out our online enquiry form.