Many businesses have had to cease trading or have seen their profits plummet as a result of the pandemic. As a result, the government introduced measures to protect those commercial tenants struggling to pay their rent. However, as the pandemic has continued and with the country in and out of lockdown, the rules have changed frequently. Indeed, the Government announced further legislation updates regarding commercial rent arrears cases during the pandemic (as well as in relation to residential tenancies) just this week. So, let’s recap on the position.
Forfeiture
Early on in the pandemic, the Government banned landlords from evicting commercial tenants on grounds of rent arrears. This ban was originally due to end on 31 December 2020. However, this has since been extended twice, and will now end on 30 June 2021. This is to coincide with the Government’s road map out of lockdown. The idea being that most, if not all, businesses will have reopened by mid-May. Then businesses will have chance to plan and start getting back on their feet before the ban on evictions is lifted.
The Government believes that this will be the last time they extend the ban. However, it is to be noted that they also said that the previous extension to 31 March 2021 would be the “final extension”. Therefore, if the roadmap does not go as planned, it is possible that we will see a further extension of the ban in the future.
Commercial Rent Arrears Recovery (CRAR)
When lockdown first hit in March 2020, the Government placed restrictions on landlords using CRAR to recover unpaid rent. After a number of extensions, the current rules are that for landlords to use CRAR:
- Up to 24 March 2021, there must be 366 days’ arrears
- 25 March to 23 June 2021 – 457 days’ arrears
- 24 to 30 June 2021 – 554 days’ arrears.
We understand that the rules will revert to their pre-Covid levels from 1 July 2021.
Paying rent
The Government intends the above to assist commercial tenants. However, they will still be liable for their rent to their landlords. Hopefully landlords and tenants will have been able to come to agreements as to paying rent; perhaps agreeing a reduced rate and/or paying in smaller instalments.
We have seen legislation regarding commercial rent arrears changing each quarter since March 2020 and it can be difficult to keep up. As a result, it is important to seek specialist legal advice before taking any action (whether as a landlord or a tenant). Call Ed Smith on 0800 988 7756 for a free initial discussion.
