There’s a storm coming

This article was written by Sanam Hussain. As this is a fast moving topic, please note that this article is current as at 11/03/21. For further information, please contact Sanam Hussain, Simon Dawes or Angela Bhaseen.

The government announced on 10 March 2021 that the ban on the use of forfeiture is to be extended for a period of three months to 30 June 2021. Legislation is also being laid to extend the current ban on the use of the Commercial Rent Arrears Recovery procedure to 30 June 2021. There was no mention on extending the current ban on the service of statutory demands and the presenting of winding up petitions but we suspect that this ban will be extended too in the coming days.

The Secretary of State for Housing, Robert Jenrick, had said when announcing the previous extension on 9 December 2020 that this last extension to 31 March 2021 would be the final extension. However, he said yesterday that “it is right that as we move through the roadmap, we ensure that businesses and renters continue to be supported”.

The government has made it clear that the current position is to support both landlords and tenants, in conjunction with the Code of Practice that was published last year. It wants the parties to agree their own arrangements for paying or writing off rent debts by 30 June but reiterated that any businesses that can pay all or any of their rent due should do so. The government further stressed that if these discussions do not happen and there remains a significant risk to jobs, it will be prepared to take further steps.

The government also launched a call for evidence on commercial rents and has said that it would welcome a broad range of feedback. The reasoning behind this call for evidence is for the government to monitor the progress of negotiations between tenants and landlords. This will also assist the government in setting out potential steps it could take post 30 June 2021. This could range from a phased withdrawal of these current bans to legislative options to target and protect those sectors and business most impacted by the pandemic.

The British Property Federation has estimated that the total unpaid rent for UK commercial property from March 2020 to the end of June 2021 will be up to £7 billion if the current rate of non-payment continues. This figure covers all commercial property, including offices and warehouses, but the vast majority of the rent unpaid is from the retail and hospitality sectors.

This latest announcement is not surprising given the current lockdown and that those worst affected by the pandemic, being bars and restaurants, cannot fully reopen until the 17 May 2021 at the earliest. Unfortunately for landlords, more pain is in store. With this further extension, landlords have not been able to take the enforcement steps for rent arrears for over a year. Whilst there was a need for the current measures to be extended, arguably the government is simply kicking the issue into the long grass. Given the level of unpaid arrears and that some well capitalised businesses have utilised these measures as an opportunity to evade paying rents due, this is not a sustainable model.

It is hoped that as the inoculation programme is progressing at speed, this will really be the final extension and landlords who have not been paid all or any rent since last year will see the return of their income stream.

Read other items in Commercial Brief - March 2021

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