October 24, 2020

Volume X, Number 298

Advertisement

October 23, 2020

Subscribe to Latest Legal News and Analysis

October 22, 2020

Subscribe to Latest Legal News and Analysis

October 21, 2020

Subscribe to Latest Legal News and Analysis

COVID-19: Government Extends The Eviction Ban For Commercial Leases To 31 December 2020

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 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 unless 189 days of rent was owed. The measures were due to end on 30 September 2020.

Extension of Measures 

On 16 September, Robert Jenrick MP (Secretary of State for Housing, Communities and Local Government) announced to the House of Commons that: 

  • The protection from forfeiture of business tenancies for non-payment of rent under s82 of Coronavirus Act 2020 (due to expire on 30 September) will be extended to 31 December in England – matching the extension already announced for Wales.
  • The restrictions on the exercise of Commercial Rent Arrears Recovery (CRAR) will be extended similarly to 31 December 2020.
  • The government is also considering a similar extension to the restriction on statutory demands/winding-up introduced in the Corporate Insolvency and Governance Act 2020 which are currently in place until the 30 September. 

The full statement outlined that the thought process was that the extensions would “stop businesses going under and protect jobs over the coming months”. However, the Government 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 this year (see here). 

There had been much commentary and a degree of expectation that this protection for tenants would be extended, but for landlords there is 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 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 problem simply postponed to a future date.
  • CRAR action has been extended so will now require 276 days outstanding rent (and 366 days) for enforcement notices given after December 24th.
  • By early 2021 a number of tenants could find themselves having to find the equivalent of around 9 months’ rent to pay to their landlords.
  • 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 now restricted, and 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.
Copyright 2020 K & L GatesNational Law Review, Volume X, Number 265
Advertisement

TRENDING LEGAL ANALYSIS

Advertisement
Advertisement

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 Practice

  • Real Estate

Secondary Practices

  • Banking & Asset Finance

  • Climate Change and Sustainability

  • Projects/Public Private Partnerships

  • Real Estate Finance

  • Resort, Hospitality and Leisure

  • Restructuring & Insolvency

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
Advertisement
Advertisement