Commercial crunch time: Government to unwind rent arrears protections

Following the temporary restrictions on landlords pursuing tenants for unpaid rent during the pandemic, the government now seeks views on how these are to be lifted.

Temporary restrictions on a commercial landlords’ rights when pursuing tenants for rent arrears were introduced during the pandemic. Many tenants have experienced severe cash-flow problems, many having to cease trading altogether for extended periods. Maintaining a full rent payment schedule has proved difficult if not impossible for some tenants, especially in the retail and leisure sectors.

On the other side, landlords have been encouraged through a government produced code of conduct to act responsibly and re-schedule payments when necessary. Some landlords have voluntarily and temporarily reduced rents or waived arrears to help their tenants through the crisis, but there is no legal requirement to do so.

The ban on commercial evictions was extended to 30^th of June and for residential tenants the six-month notice periods and bailiff enforced eviction ban was extended to 31^st of May.

In order to plan for a smooth transition out of the restrictions on commercial landlords actions, the Government has launched a consultation on whether the existing measures need to be extended, removed, or replaced.

The government is therefore seeking the views of landlords, tenants and other stakeholders in this to obtain their views on the issue.

The government has said the outcome of the consultation will pave the way for a decision on how to proceed and will be open for responses until 11:45pm on 4th May 2021.

“If there is evidence that productive discussions between landlords and tenants are not taking place, and that this represents a substantial and ongoing threat to jobs and livelihoods, the government will not hesitate to intervene further,” according to a government statement.

The measures which are the subject of the consultation are:

• The current moratorium on commercial lease evictions established by section 82 of the Coronavirus Act 2020; and
• The restrictions on the use of Commercial Rent Arrears Recovery (CRAR) established by the Taking Control of Goods (Amendment)(Coronavirus) Regulations 2021

The consultation proposes six possible options for consideration:

• Permitting the restrictions to expire on 30th June 2021. The option would revert back to normal and would permit Landlords to recover rent arrears restoring the full rights that landlords were previously entitled to.
• The suspend commercial lease forfeitures due to expire on 30th June, but keep the restrictions on insolvency and CRAR.
• Allow the existing measures to temporarily remain in place for those businesses most affected by COVID-19. Tenants would have to prove their degree of hardship – those tenants who were forced to close down entirely would be beneficiaries of this option.
• Enhanced mediation between commercial landlord and tenants, by the appointment of a qualified third party supporting the parties in managing the issue.  The mediator would remain neutral and would not enforce a settlement on the parties involved.
• Non-binding adjudication between landlords and tenants by an independent, accredited adjudicator setting out a settlement based on the evidence. This judgement would not be binding on the parties – the dispute could still be taken to court.

More drastic measures than these would involve overturning well established principles of landlord and tenant law and may in practice prove too difficult, too complex and too expensive to achieve or prove legally effective. But nothing can be ruled out, hence the importance of responding to the consultation.

The consultation therefore is seeking views from all parties involved to try and reach a solution which is acceptable to all and one which achieves a reasonable balance between the interests of both landlords and tenants.

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