What are the current protections?
Since the outbreak of the COVID-19 pandemic, the government has repeatedly extended temporary prohibitions on landlords taking certain enforcement action against tenants.
Commercial tenants currently benefit from a number of COVID-19 focussed protections including:
restrictions on the use of statutory demands and winding up petitions to encourage tenants to pay rent;
a temporary prohibition on landlords forfeiting commercial leases as a result of a tenant’s failure to pay rent; and
a requirement for arrears of at least 366 days’ rent to be outstanding before Commercial Rent Arrears Recovery action (CRAR) can be exercised.
These measures were all due to come to an end on 31 March 2021 as part of the government’s ‘final’ extension. However, despite the government’s insistence in December that restrictions would come to an end in March 2021, since then there has been a further extensive lockdown which has forced non-essential retailers to close.
What is the latest announcement?
The government has now announced that, in relation to the temporary prohibition on landlords forfeiting commercial leases, there will be a further extension until the end of June which “will help those worst affected by the pandemic, such as bars and restaurants, get back to business in May”.
Further, in relation to CRAR, the restrictions on landlords exercising CRAR are being extended, so that the minimum number of days’ outstanding rent required for CRAR to be exercised will be 457 days’ rent between 25 March and 23 June, and 554 days’ rent between the 24 and 30 June.
Robert Jenrick, the Housing Secretary has commented that these measures “build on the government’s action to provide financial support as restrictions are lifted over the coming months – extending the furlough scheme, business rates holiday and the Universal Credit uplift.” However, the crucial difference here is that the government is not providing any funding: landlords are the ones funding this moratorium.
The government has also reiterated its message that “any businesses that can pay all or any of their rent should do so”; however, this will be of very little comfort to those landlords who have seen tenants simply refuse to pay rent, even if they are able to.
Further, in what could be read as a threat to landlords, the government has said that:
“The government’s current position is to support commercial landlords and tenants to agree their own arrangements for paying or writing off rent debts by 30 June. This is supported by the code of conduct published by the government last year, setting out best practice for these negotiations. But, if these discussions do not happen and there remains a significant risk to jobs, the government is also prepared to take further steps.”
The express reference to landlords writing off debts, and the suggestion of “further steps” is something that will be of significant concern to many landlords.
The government has also confirmed that a review of landlord and tenant legislation will be launched later this year which will “consider a broad range of issues” including the Landlord & Tenant Act 1954, different models of rent payment and the impact of Coronavirus on the market.
This review was originally announced in December and we can still only speculate on the detail; however, we expect that the Law Commission’s 2006 proposal for abolishing forfeiture, one of the most powerful remedies available to landlords, may well resurface. Any proposed changes to a landlord’s right to forfeit would, of course, be extremely controversial.
What does this mean for landlords and tenants?
This news will leave many landlords in the difficult position of knowing that some tenants who could pay rent, but who have not paid any rent since the outbreak of the COVID-19 pandemic, will see this as a further three month period during which they can simply avoid paying rent.
However, both landlords and tenants should bear in mind that landlords can still issue court proceedings against a tenant for non-payment of rent. Therefore tenants who can pay but who are simply refusing to pay are still at risk from enforcement action by their landlord.
Authored by Ben Willis