Back in August, the government announced that it would extend the restriction on forfeiture for non-payment of rent until September 30. New legislation since the lockdown has also imposed limitations on Commercial Rent Arrears Recovery (CRAR) and effectively banned the presentation of winding-up petitions in most circumstances. The remedies available to commercial landlords have been significantly curtailed.
Many landlords were gearing up to take action against defaulting tenants from the start of October, however, the government has now extended the restrictions on forfeiture for non-payment of rent and CRAR until December 31. This is to give struggling businesses more time to protect jobs and ‘focus on rebuilding’.
Daniel Long, director at WHN Solicitors, explains what this means for landlords.
What is the issue that landlords are facing?
It’s true to say that many landlords have struggled over the pandemic – some commercial tenants have simply not engaged with landlords as the government had hoped, to try to agree sensible interim obligations in relation to lease liabilities. This is despite many tenants having now re-opened stores and resumed trading.
The last six months have been hugely challenging for both landlords and tenants, but some landlords have received no, or very little, rent since the first quarter of the year and many of these landlords have their own financial obligations to adhere to.
Many landlords had been holding off until October to be able to take steps to recover arrears or possession of their premises. This is now not possible, at least in the short term.
What has now been announced?
The prohibition on landlords forfeiting a lease as a result of a tenant’s failure to pay rent has been extended until the end of the year, and CRAR action will now require 276 days’ outstanding rent – rising to 366 days for enforcement notices given after December 24.
The government has made it clear in a previously announced Code of Practice that landlords and tenants should ‘act in good faith’ and tenants should pay rent where they can. This is still very much the case.
Announcing the extension, the government said it was intended to support those businesses ‘struggling the most during the pandemic.’
However, many feel that the blanket way in which the extension has been applied is open to abuse, with some tenants now planning to withhold rent payments for the rest of the year. Clearly this puts landlords in a very difficult situation.
The government points out that both landlords and tenants can also access a £160billion package of support available for businesses, but for many this is little comfort.
As a landlord, what enforcement steps can I take?
Remedies for landlords will remain severely limited but it will be worth considering options such as drawing down from a rent deposit, seeking rent from former tenants, guarantors or sub-tenants, or issuing court proceedings against tenants for non-payment. At the time of writing, we wait to understand if the temporary ban on winding-up petitions will also be extended beyond September 30.
Communication remains key – tenants will be aware that when restrictions are lifted, they will face severe financial repercussions if they spent the best part of nine months deferring payments. Where tenants are unable to meet their obligations, it will often be in the interests of both parties to a lease to come to a sensible compromise.
Daniel Long is a director based at WHN Solicitor’s Bury office. Daniel heads up the commercial property dispute resolution department and helps clients with all areas of commercial landlord and tenant disputes. To contact Daniel, call him on 0161 761 8063 or email firstname.lastname@example.org