Wednesday, 9 December 2020

COVID-19: Business Evictions Ban Extended until 31 March 2021

 The government has today announced an extension of the ban on eviction of business tenants affected by the pandemic until 31 March 2021, a move that will be particularly welcomed by the struggling hospitality and retail sectors.

This extension is described in the government’s press release as “final” and is designed to give landlords and tenants 3 months to come to an agreement on unpaid rent.

The ban on business evictions began at the start of the pandemic in March 2020, and so will have been in place for a whole year when it finally draws to a close (assuming we can take the government at their word on "final" and there are no further U-turns).

It does not absolve tenants of their liability to pay rent (and interest) but simply defers a landlord's ability to re-enter premises or forfeit a lease for non-payment. 

It remains open to landlords to sue for rent arrears, unless the tenant is able to reach agreement with its landlord to waive or defer all or some of the payments.

The government says it is “clear” (that word again) that where businesses can pay any or all of their rent, they should do so.

Further guidance to support negotiations between landlords and tenants will also be published shortly.

It’s not yet “clear” what form this guidance will take.

Earlier in the year the government launched a voluntary code of practice for commercial landlords and tenants, developed with the retail, hospitality and property sectors to encourage best practice. The new guidance will sit alongside the code.

The restrictions on CRAR, statutory demands and winding-up petitions have also been extended until 31 March 2021.

UK Hospitality welcomed the announcement (although they would have preferred an extension lasting until June 2021), saying it would “help avoid an immediate bloodbath of business failures across hospitality”.

The worry remains that the debt mountain that has been allowed to build up will result in a flurry of evictions in April unless more support is provided.

On the other side of the fence, landlords have complained that tenants have been exploiting the moratorium by refusing to pay rent, even when able to do so.

The British Property Federation welcomed the end of the moratorium being fixed at 31 March 2021. BPF boss Melanie Leech said “this signals the end of the road for those who can pay rent, but have so far refused to do so”.

It has however been possible throughout the pandemic for landlords to sue tenants for unpaid rent where they suspect them of having the funds.

The pandemic has resulted in ballooning rent arrears that have not been waived, but simply held in suspended animation by the moratorium.

The FT reports that UK Hospitality estimates rent debt for the hospitality industry alone will reach about £1.6bn by the end of this year.

The total rent unpaid for all commercial property between March and the end of this year has been estimated at around £4.5 billion.

The British Retail Consortium says that about 80% of retail tenants in the UK have reached agreements with their landlords to pay off rent arrears; but this reduces to 50% for the hospitality sector according to UK Hospitality.

Alongside the extension to the moratorium, the Secretary of State for Housing, Communities & Local Government, Robert Jenrick, has also announced “a review of the outdated commercial landlord and tenant legislation, to address concerns that the current framework does not reflect the current economic conditions”.

The review will consider “how to enable better collaboration between commercial landlords and tenants and also how to improve the leasing process to ensure our high streets and town centres thrive as we recover from the pandemic and beyond”.

The review will be launched early next year and will consider a broad range of issues including the Landlord and Tenant Act 1954 Part II, different modes of rent payment, and the impact of Coronavirus on the market.

That suggests the possibility of a more root and branch reform rather than the vaguer aspirations expressed in the code, but we’ll have to wait and see what happens.

These protections for business may have been announced by the Secretary of State for Housing, but as several people pointed out to me on Twitter when I tweeted these changes earlier today, nothing similar has been announced for residential property (warrants of eviction following a possession order are currently suspended until 11 January 2021 [UPDATE 08/01/21 - Now extended until 21 February 2021, but with some important changes]).

Perhaps the Secretary of State for "Housing” thought it was outside his brief.

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