It would be fair to say that 2020 has been a year of uncertainty in the commercial rental market for both Landlords (to collect rents) and for Tenants (to bring in enough money to rent). However, although it’s a new year, there seem to be new uncertainties, with a further impact on businesses.
On 9 December 2020, it was announced that the temporary ban on the use of forfeiture for non-payment of rent, the use of Commercial Rent Arrears Recovery (CRAR) and the issue of statutory demands and winding up petitions where a company cannot pay its bills is due to COVID-19, will be extended until the end of March 2021.
From 25 December 2020, it was introduced that Landlords will only be able to use CRAR where the arrears are the equivalent to at least 366 days of net rent.
However, the Government is still highlighting, that where a Tenant can pay the rent, then they should continue to pay. The measures around CRAR are intended to protect the worst affected business and not those who are still able to meet their financial obligations. If other obligations in a lease are breached, other remedies are still available to the Landlords.
Examples of some remedies a Landlord can use, but may not be available for all instances, include:
- Forfeiture for breaches of covenant other than non-payment of rent;
- Exercising their right to withdraw funds out of any rent deposit that may exist;
- Pursuing any guarantor or previous tenant who is liable under the terms of the lease;
- Acting against unauthorised occupiers/those who have unlawfully assigned or sublet and pursuing the legally named tenant when another party occupies;
Whichever route a Landlord wishes to pursue will be depending on their specific situation and each different route, may lead to a different outcome. The outcome could lead to, for example, a vacant property and no other proposed tenant coming forward to take on a new lease.
In the majority of situations, leases are medium to long term agreements. Under the current circumstances, a tenant may not be able to meet all of its liabilities in the short-term, but they may be able to offer a proposals as to how it will meet these liabilities in the long-term. In the event the Landlord and Tenant wish to agree alternative terms in the interim or they agree to change the terms of the lease, any agreement should be formally documented to ensure it is enforceable between the parties.
If there is no agreement made between Landlord and Tenant, it should be noted, as things stand, the Governments current position is that the protections will fall away at the end of March 2021 and no further extensions will be granted. However, in light of the new lockdown that which been imposed it would not come as a surprise to Commercial Property Landlords, Tenants or professionals who deal with Commercial Property if the protection for business tenants is once again extended beyond 31 March 2021.
For Business owners, who are property owner occupiers or those who are Tenants, further grants have been proposed, with a maximum of £9,000.00 available as Local Authority grants, to help business to survive during this lockdown. Each Local Authority will have set up their own portals for businesses to apply for these, and any business owner will need to contact them directly.
The Communities Secretary, Rt Hon Robert Jenrick MP, has announced that there will be a review of Commercial Landlord and Tenant legislation in the near future, as it is now viewed as being outdated, particularly in the current climate.
If you would like advice on these points or any other Property matters, please contact Mohammed Rahman at Borneo Martell Turner Coulston Solicitors [email protected] 01604 622101