Temporary legislation introduced under the Coronavirus Act 2020 placing a ban on commercial evictions has been extended until 25 March 2022. As the threat posed by the coronavirus pandemic on the commercial property sector fails to subside, the pressure on financially strained tenants is once again lightened.
The temporary ban is in place alongside restrictions to Commercial Rent Arrears Recovery (CRAR) powers, blocking landlords from seizing goods to recover rent arrears. The Treasury confirmed that the total number of days’ outstanding rent required for CRAR will remain at 554. This move will continue to protect tenants of commercial leases with outstanding rent accumulated during the coronavirus pandemic.
Although this move provides much-welcomed breathing space to commercial tenants, commercial landlords are pushed to a crossroad as their eviction powers are temporarily disabled. Announcing the extension ahead of the next quarterly repayment deadline, landlords will need to revisit the drawing board and press pause on their plans to both recover unpaid rent and replenish cash flow.
The moratorium on winding up petitions and statutory demands has also been extended for another three months, until 30 September 2021. The timing mismatch with the commercial eviction ban will, come September, give a well advised landlord the ability to exert pressure on those tenants who won’t pay, rather than can’t pay.
Rebuilding the commercial property sector post-Covid-19
The Treasury hopes to establish a legally binding arbitration process to ring-fence Covid-19 commercial rent arrears, lightening the load on commercial tenants adversely impacted by lockdown restrictions. Commercial landlords are urged to enter repayment agreements or consider partial settlements as envisaged in the existing guidelines issued by the Government dealing with landlord/tenant discussion around pandemic-related lease issues.
Business Secretary, Kwasi Kwarteng said:
“Sorting out commercial rent debts will be key to enabling businesses to plan ahead with certainty and ultimately build back better from the pandemic.
“The new arbitration process will be underpinned by law, providing commercial tenants and landlords with peace of mind that Covid-19 related rent debts will be settled fairly, and with finality.
“In the meantime, I encourage landlords and tenants to keep working together to reach mutually beneficial agreements.”
The moratorium extension comes as a blow to commercial landlords and a saving grace to business owners. As the reopening of office space is subject to the relaxation of lockdown restrictions, for which the review has been delayed by four weeks, tenants with the funds to make repayments should continue to do so as and when they are subsequently given the green light to reopen.
As the moratorium on commercial evictions, first introduced in March 2020, and now extended to March 2022 marks a two-year pause, the relief measure establishes a new precedent in recent history.
As landlords scramble to raise sufficient cash flow to make headway through the pandemic, we question if this is a ticking time bomb for unviable businesses in need of recovery. As current economic uncertainty results in the rapid deterioration of once-thriving companies, it is essential to mitigate trading conditions and the heightened exposure to risk. BTG Advisory can offer critical support to vulnerable firms and help navigate Covid-19 recovery.