Businesses that have had to remain closed during the pandemic and are unable to pay rent on their commercial property will continue to be protected from eviction, giving them the breathing space they need and helping to protect jobs, the government has announced.
In order to give places such as nightclubs and other hospitality businesses the help they need to recover from the pandemic, legislation will be introduced to ringfence outstanding unpaid rent that has built up when a business has had to remain closed during the pandemic. Landlords are expected to make allowances for the ringfenced rent arrears from these specific periods of closure due to the pandemic and share the financial impact with their tenants.
The legislation will help tenants and landlords work together to come to an agreement on how to handle the money owed – this could be done by waiving some of the total amount or agreeing a longer-term repayment plan.
This agreement should be between the tenant and landlord and, if in some cases, an agreement cannot be made, the law will ensure a binding arbitration process will be put in place so that both parties can come to a formal agreement. This will be a legally binding agreement that both parties must adhere to.
In order to ensure landlords are protected, the government is making clear that businesses who are able to pay rent, must do so. Tenants should start paying their rent as soon as restrictions change, and they are given the green light to open.
The existing measures in place to protect commercial tenants from eviction will be extended to 25 March 2022. This is to ensure that the sectors who are unable to open have enough time to come to an agreement with their landlord without the threat of eviction.
Statutory demands and winding up petitions will also remain restricted for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.
The extension applies to all businesses, but the new measures that will be introduced by primary legislation will only cover those impacted by closures. This mean that rent debt accumulated before March 2020 and after the date when relevant sector restrictions on trading are lifted, will be actionable by landlords as soon as the tenant protection measures are lifted.
The arbitration process will be delivered by private arbitrators but in accordance with guidelines which we will set out in the legislation, and they will have to go through an approval process to prove their impartiality.
A government response to the call for evidence on commercial tenancies will be published in due course.
The Ministry of Justice have confirmed that the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords will also be extended. The total number of days’ outstanding rent required for CRAR will remain at 554 days. This measure will continue to provide protection to tenants of commercial leases with rent arrears accumulated during the coronavirus period, while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020.
While the measures will give some immediate respite, it is essential that business owners use this time wisely, by putting plans in place now to restructure or recapitalise their businesses if necessary to ensure they are fit and able to continue when restrictions are lifted.
For more information and assistance for you and your business, contact your usual Beavis Morgan partner or a member of our BM Advisory team.
See: Eviction protection extended for businesses most in need