Commercial tenants protected from aggressive rent collection practices during Covid-19
A number of high street shops, restaurants, bars and other companies currently affected by the Covid-19 pandemic have been under pressure from landlords chasing payment of outstanding rent.
Commercial tenants told to ‘pay what they can’ to landlords
In measures designed to help protect the UK High Street, the government’s Business Secretary, Alok Sharma, announced on 23 April 2020 that such businesses will now be protected from any aggressive rent collection practices from landlords, and instead, they will be asked to pay what they can manage as we continue to go through the Covid-19 pandemic.
It is believed that most landlords and tenants are working well together to agree how best to deal with the growing pressures that tenants are under, to ensure that they can trade through the crisis and make payments over a period that is affordable. The new measures are designed to halt the minority of landlords who have put undue pressure on their tenants in an attempt to recover outstanding monies.
Government bans statutory demands and winding-up petitions
The announcement means that the government has temporarily banned the use of statutory demands (made between 1 March 2020 and 30 June 2020), as well as all winding up petitions presented from Monday 27 April to 30 June, in a situation where a company is unable to satisfy its bills due to the impact of coronavirus. The changes to the established rules, outlined this week and before, will feature in the Corporate Insolvency and Governance Bill originally set out in March by Alok Sharma
Further restrictions on Commercial Rent Arrears Recovery (CRAR) for Landlords
The government will also introduce secondary legislation that will result in landlords not being able to use Commercial Rent Arrears Recovery (CRAR) against their tenants during the crisis, which should also prove very useful to tenants. One exception to this is where the landlord is owed in excess of 90 days unpaid rent.
When making the announcement the Business Secretary said:
“In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.
Our unprecedented package of support can help commercial landlords, including through the recent expansion of the Coronavirus Business Interruption Loans Scheme.
I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants. I am also taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the COVID-19 emergency continues.”
It is hoped that these measures (and others recently introduced) will avoid further financial pressures on businesses from their landlords, and protect them from closure as a result of the pandemic. Saving businesses and jobs by encouraging these fair practices will lessen the impact of the pandemic on the UK economy.
What about the landlords?
Whilst this policy will be seen as positive from the point of view of the tenants, it poses a risk. Landlords fear that tenants will simply decide to use this change of the rules to withhold payments to their landlords. This will almost inevitably lead to financial issues and hard times for landlords instead. We already know of many commercial landlords suffering real financial strain as a result of the pandemic. Tenants do therefore also need to play their part by ensuring they pay as much as they can so that landlords are also supported. Tenants should always be encouraged to exhaust all forms of government help and assistance that is now available before seeking rent concessions from their landlords.
Rix & Kay is experienced in negotiating and resolving disputes between landlords and tenants. For more information and an informal chat about how we can help, contact Richard Ludlow, Head of Dispute Resolution e. firstname.lastname@example.org t. 01732 441695 or Stewart Gregory who is a Partner in Rix & Kay’s Commercial Property Team e. email@example.com t. 01273 766930