Commercial LTs and Moratorium Ban
The ban on commercial evictions has been extended to the end of March 2021, though there’s plenty of time yet for government to extend the date still further in light of the continuing covid-19 situation. At the time of writing, there were whispers of yet another extension being announced, (though government said in December it would not grant another extension).
For now, until the ban is lifted, business owners are protected from eviction. In practice, this means a commercial tenant is not protected from being served with an eviction notice – but proceedings cannot be issued.
Though the extension simply delays the inevitable for many a business (particularly through this winter period), it at least buys some much-needed time for businesses to adapt to the new conditions and find a way to pay their rental debt and survive the pandemic.
Government – which noted in December that most commercial landlords have shown flexibility towards their tenants – said it will shortly publish further guidance to support negotiations between the parties.
Housing secretary Robert Jenrick said: “We are witnessing a profound adjustment in commercial property. It is critical that landlords and tenants across the country use the coming months to reach agreements on rent wherever possible and enable viable businesses to continue to operate.”
However, the reality is that a year on from when the protection from eviction was introduced – the most financially-challenged commercial tenants are likely to already have accumulated many months of unpaid rent. The latest figures show that the moratorium on commercial property evictions has led to an estimated £4.5 billion in rent debt.
On a related note, the restriction on landlords using Commercial Rent Arrears Recovery (CRAR) to recover unpaid rent will also automatically extend to 31 March. Similarly, insolvency measures on restricting statutory demands and winding up petitions have also been extended to the same date.
Review of the law
No changes in the legal framework governing commercial landlord and tenant can come in time to assist troubled tenants right now. Commercial landlord and tenant legislation is outdated. Even the government has openly acknowledged this and recently announced a review of the legal framework.
The announcement was light on detail and it appears it will not be launched until at least early 2022. All we can really report so far is that the review is set to consider the wider impact of covid-19 on the commercial property sector amid widespread concerns that the current framework does not reflect the current economic conditions; and it will also look at the Landlord and Tenant Act 1954 Part II and different models of rent payments.
For now, commercial landlords and tenants are in no enviable position; similarly government is in an unenviable position of balancing the need to help businesses directly affected by covid-19 and shoring up the economy – and encouraging the parties to negotiate the best way to negotiate the issues of mounting unpaid rents.
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