September 16, 2021

Volume XI, Number 259

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COVID-19: Government Extends the Eviction Ban for Commercial Leases to 30 June 2021

The real estate industry, and particularly the hospitality and retail sector, has been hard hit by the COVID-19 pandemic. Occupiers in those sectors have put a lot of pressure on the government to continue to provide further support.

BACKGROUND

Commercial tenants benefitted from a prohibition on landlords forfeiting commercial leases for non payment of rent, and also restrictions on landlords using the Commercial Rent Arrears Recovery (CRAR) procedure. The measures were due to end on 31 March 2021.

EXTENSION OF MEASURES 

On 10 March, Rt Hon Robert Jenrick MP (Secretary of State for Housing, Communities and Local Government) and Rt Hon Kwasi Kwarteng (Business Secretary), announced that: 

  • The protection from forfeiture of business tenancies for non-payment of rent under s82 of Coronavirus Act 2020 due to expire on 31 March will be extended to 30 June 2021 and the Ministry of Justice will also lay a Statutory Instrument to extend the restrictions on the exercise of Commercial Rent Arrears Recovery (CRAR) similarly to 30 June 2021.

  • The full statement outlined 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. However, the government have also made it clear that where businesses can pay their rent, they should do so, consistent with the message contained in the Code of Practice for the Property Sector which was published in June of 2020 and which the government have previously referred too. Click here to view our alert regarding this topic.

  • Significantly in the announcement on 10 March, the government also stated that if discussions between landlords and tenants don’t happen they are prepared to take further steps. They will be “launching a call for evidence on commercial rents” aimed at monitoring progress of negotiations, and are anticipating the steps that could be taken after 30 June. There was mention of a potential “phased withdrawal” of protections being considered.

There had been much commentary and a degree of expectation that this protection for tenants would be extended, but for landlords there is still little consolation. Working collaboratively as a sector is of course the preferred option, but some tenants have been refusing to pay rent even though they should pay and are able to do so. There has also been an increase in tenants using the measures as an opportunity to restructure their existing obligations.

EFFECTS OF MEASURES

  • The rents are effectively being deferred which will mean an increase in tenant debts. Interest on arrears (where payable under lease) will also accrue - so this could be a problem simply postponed to a future date.

  • CRAR action will be extended, so will now require 457 days’ outstanding rent between 25 March and 23 June, and 554 days’ between 24 and 30 June. This continues to protect tenants with rent arrears accumulated during the coronavirus period, while protections from forfeiture are in place under the Coronavirus Act 2020. 

  • There will be an immediate impact on landlords’ income and cash flow position in the short term and this in turn could impact negatively on their own businesses.  

  • Landlords’ remedies are still restricted. The announcement made no mention of the moratorium on statutory demands and winding up petitions. Currently, landlords will only be able to rely on rent deposits/bank guarantees, claims against former tenants/guarantors, or issuing a debt claim through the lower courts.

COMMENT AND LINKS

The press release on 10 March referred to the fact that there would be a review of commercial landlord and tenant act legislation later this year which will further consider models of rent payment and impact of coronavirus on the UK market.

Additional Links:

Copyright 2021 K & L GatesNational Law Review, Volume XI, Number 70
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About this Author

P. Wayne Smith Real Estate London
Practice Area Leader - Real Estate

Wayne is a partner in the London office where he leads the real estate team, and he serves as co-practice area leader for the K&L Gates’ firm wide real estate practice. Wayne acts primarily for institutional investors on acquisitions, disposals and active portfolio management work as well as private investors and developers.

+44-0-20-7360-8201
Steven D. Cox Real Estate Attorney K&L Gates London, UK
Of Counsel

Steven is a member of the Real Estate practice group and deals with all aspects of commercial property, including the sale and purchase of commercial property, landlord and tenant matters and property finance. He acts for a wide range of clients including property owners, occupiers, investors and lenders.

Steven is a LEED Accredited Professional (LEED-AP), a distinction he earned through the Green Building Certification Institute. As a LEED-AP, he has demonstrated a thorough understanding of green building practices and principles, as well as the LEED Rating System.

Primary...

44.(0)20.7360.8213
Bonny Hedderly Professional Support Attorney K&L Gates London, UK
Professional Support Lawyer

Ms. Hedderly is a senior associate and professional support lawyer in the Real Estate group. She has acted on behalf of a variety of clients including banks, pension funds, opportunity funds, retailers, individual investors, developers and office users. She is experienced in dealing in all aspects of commercial real estate work, including acquisitions, sales, joint ventures and partnerships.

Professional Background

Ms. Hedderly qualified as a lawyer in 1994 and joined the firm in November 2007. She has previously worked at three international law firms dealing in all...

44.(0)20.7360.8192
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