October 2020

Since March, the Government has announced and implemented a number of measures in an attempt to stabilise the economy and protect those businesses which are financially struggling as a result of the Covid-19 pandemic.  

What’s new and what does it mean?

The latest regulation under the Coronavirus Act 2020 (the Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No 2) Regulations 2020) extends those measures which protects tenants from eviction for non-payment of rent. These measures were originally set to run from 26 March 2020 to 30 September 2020 and have now been extended until 31st December 2020.

These measures mean that landlords will continue to be restricted in their dealings with their tenants:  for example a landlord will be unable to forfeit a lease on the grounds of non-payment of rent or to refuse to grant the tenant a new lease under the 1954 Act due to its failure to pay rent.  Landlords are also prevented from using statutory demands or winding-up petitions as a means of rent recovery until 31 December 2020 (unless the reason for non-payment is not COVID-19 related – difficult to prove). Also commercial landlords are prevented from using the Commercial Rent Arrears Recovery (CRAR) procedure to recover what it’s owed through seizing and selling the tenant’s property (unless the tenant owes at least 276 days of rent). 

The tenant will still owe the unpaid rent and will face demands for payment in full (and likely forfeiture and eviction) after 31 December 2020.

What’s next?

Many would say these measures are necessary steps to prevent economic collapse. However it is the period after 31 December through which landlords and tenants will have to carefully navigate as it is likely tenants will continue to struggle to meet their rental obligations as they currently stand.

When the measures are eventually lifted, the landlord and tenant may want to consider negotiating new rent terms.  Striking a balance during these negotiations is likely to be crucial to the future success for both landlord and tenant.  Landlords are being encouraged to follow the voluntary Code of Practice designed to ‘promote good practice amongst Landlord and Tenant relationships’ to help prevent the tenant’s insolvency through ‘transparency and collaboration’.

If enough tenants’ businesses fail, the demand for commercial space will be dramatically reduced and the long term impact on landlord portfolios will be significant. It may therefore be in the tenant and landlord’s mutual interest to reach a workable agreement going forward.

If you are a tenant unable to meet your contractual obligations or a landlord uncertain of your options and would like advice on your next steps, please contact our Commercial Property team at CommProp@prettys.co.uk.