The Commercial Rents Moratorium Continues

The commercial rents moratorium continues: what lies beyond the cliff edge?

On 23 March 2020 the Government announced that commercial tenants could not be evicted for non- payment of rent. This moratorium on forfeiture of business leases was intended to protect businesses whilst they were affected by the pandemic restrictions. It was put into effect by the Coronavirus Act 2020 and was due to expire on 30 June 2020 "or such later date as may be specified...".

Since then there have been 3 further extensions, the last of which was due to expire on 30 June 2021. We reported & commented on the moratorium & the extensions at the time:

Band Hatton Button The Coronavirus Act moratorium

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The Government announced in parliament on 16 June that the measures will remain in place for a further 9 months until 25 March 2022- 2 years after they were first introduced as a temporary relief for tenants.

The moratorium prevents landlords from evicting business tenants for non-payment of any rents, regardless of when those arrears accrued or the reasons for non-payment. That has frustrated many landlords and we have previously reviewed the issues and options for landlords:

What Happens if your Commercial Tenant Doesn't Pay the Rent

There is however some indication of what might lie beyond the cliff edge. The Government has said that it intends to introduce legislation before the end of the moratorium to create a "backstop" whereby landlords & tenants will be required to negotiate arrangements for payment of arrears and future rents and if no agreement is reached they will go into binding arbitration.

The mechanics of the backstop and the detail of how it will operate are yet to be debated but the Government announcement did carry a clear message to tenants that "all tenants should start to pay rent again in accordance with the terms of their lease or as otherwise agreed with their landlords - as soon as restrictions are removed on their sector if they are not already doing so." The clear implication of this is that tenants who are still carrying pre-covid arrears or who have not paid rent when they could afford to do so are less likely to get the sympathy of the landlord or of the arbitrator and are going to be given less indulgence in time to pay arrangements.

The rent arrears are a debt and, at the time of writing, the current restriction on the use of the Commercial Rent arrears Recovery (CRAR) procedures is still due to end on 30 June 2021.

We will continue to monitor the development of these restrictions and the backstop arrangements. We are always available to discuss any specific issues with landlords or with tenants who are affected by these issues. We have an experienced property litigation team who can advise both landlords and tenants about their legal position and options around rent arrears.

For more information, please contact members of our team - Raman Dhillon & Jon Wilby

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Disclaimer - This article contains information on current legal issues applicable at the time of printing. Please note there may have been changes subsequently which have not been incorporated into the material. This article is intended for information purposes only and its content should not be applied to any particular set of facts or relied upon without legal or other professional advice.