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Further breathing space provided to commercial tenants as a result of amended legislation

25-06-2020


As first discussed in my article on 30 April 2020 (https://www.gardner-leader.co.uk/blog/further-laws-introduced-by-the-government-to-assist-commercial-tenants/), the Coronavirus Act 2020 afforded protection to commercial tenants from forfeiture for non-payment of rent up to 30 June 2020.

At that time, the big question was how long this moratorium would endure, particularly in light of rent for the third-quarter falling due on 24 June 2020.

UK landlords should be collecting at least £2.5bn for the third quarter for shop rents alone[1], although rent collection in the last quarter in March amounted to approximately 50% of what was owed[2].

Extension of the moratorium

The Government has now decided that the moratorium on forfeiture for non-payment of rent shall apply until at least 30 September 2020. Further, the Government is due to extend the temporary ban on the use of statutory demands and winding-up petitions where a company cannot pay its bills due to coronavirus until the same date.

As a result, a landlord’s remedies against a tenant for unpaid rent continues to be extremely limited.

However, as previously discussed, many landlords/tenants have been able to communicate constructively and arrange alternative payment structures to reflect the current commercial realities.

This flexibility and collaboration in many quarters has been enshrined in a new voluntary Code of Practice[3] for landlords/tenants which is designed to assist parties in agreeing new financial arrangements where necessary.

Whilst the Code provides helpful guidance to help try and help facilitate productive landlord/tenant relationships moving forward, there is concern for many tenants who despite the current protections, are still ultimately liable to pay full rent in the absence of reaching an alternative agreement with their landlord.

The latest measures may therefore still end up achieving no more than kicking the can further down the road as in effect 9 months’ worth of rental arrears may be legally enforceable by landlords (with their own cash flow issues) come the end of September in the absence of further legislation.

[1] https://www.bbc.co.uk/news/business-53156586

[2] https://www.theguardian.com/business/2020/jun/24/commercial-landlords-expect-shortfall-on-rent-day-for-uk-retailers-covid-19

[3] https://www.gov.uk/government/publications/code-of-practice-for-the-commercial-property-sector/code-of-practice-for-commercial-property-relationships-during-the-covid-19-pandemic


Sam Pinder

Associate
Commercial Disputes
Property Disputes

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