Commercial Property Rent Arrears and Repossessions – Latest Update

Now that the June quarter day is upon us many landlords with tenants in arrears have been waiting for further announcements.

The government has now announced that it will be extending the moratorium on forfeiture and the restrictions on issuing statutory demands and winding up petitions for non payment of rent from 30 June until 30 September 2020.

Secondary legislation will also be enacted to prevent landlords from using commercial rent arrears recovery unless they are owed 189 days of unpaid rent (the previous threshold was 90 days). The time period for this measure will also be extended to the end of September. The measures are expected and mean that landlords’ remedies against tenants for unpaid rent will continue to be significantly restricted for the next 3 months.

In addition, a voluntary code of practice has been published to help facilitate discussions between commercial property landlords and tenants in relation to rent negotiations. The code sets out expectations that landlords and tenants should share the costs and risks arising from the COVID-19 pandemic in a measured way. It is not intended to undermine or alter the legal relationship between landlords and tenants or override arrangements which have already been put in place. Importantly the code states that tenants who are in a position to pay in full should do so, and if they cannot pay in full they should pay what they can, although of course this needs to be read in the context of the landlords having reduced options available to them to secure payment.

Landlords are also expected to show leniency to businesses where they can afford to. The code makes clear that tenants should justify their claims to assistance. They should, for example, demonstrate they have already made use of the business assistance schemes introduced by the UK Government and that they would be viable but for the COVID lockdown. The code advises that any service and insurance charges payable under a lease should continue to be paid in full but that they should be reduced accordingly where the lack of use of a property has lowered the service charge costs incurred.

If you require any other information or advice please contact Janice Young on  [email protected] or by phone on 01582 514 000