September 18, 2020

UK COVID-19: Government extends protections for commercial tenants

After much speculation, on 15 September 2020 the UK Government further extended protections to business tenants in England.

Current COVID-19 protections for commercial tenants

Currently, commercial tenants benefit from various protections arising from the COVID-19 pandemic such as the temporary ban on landlords forfeiting commercial leases as a result of non-payment of rent, and a requirement for at least 189 days of unpaid rent to be outstanding before Commercial Rent Arrears Recovery (CRAR) may take place. The temporary prohibition on forfeiture was due to end on 30 September 2020.

What has changed?

Section 82 of the Coronavirus Act 2020 prevents landlords from using a right of re-entry to bring a business tenancy to an end on the basis of non-payment of rent during the “relevant period” as defined in the legislation. The “relevant period” has now been extended to come to an end on the 31 December 2020.

The regulations also increase the minimum amount of net unpaid rent that must be outstanding before Commercial Rent Arrears Recovery (CRAR) may take place. The net unpaid rent for the purposes of CRAR during the Relevant Period will be as follows:

  • From 29 September 2020 until 24 December 2020 (inclusive), 276 days’ rent.
  • From 25 December 2020, 366 days’ rent.

What does this mean?

Whilst the stated purpose of the extensions is to give businesses breathing space, the Government has made clear that where a tenant can afford to pay rent, it should do so. This will not provide much comfort for commercial landlords, who could now have seen tenants not having paid rent for some time now, putting considerable pressure on the landlord’s own business.

What can commercial landlords do?

The short answer is, not a great deal in respect of forfeiture. Tenants may well see this as an invitation to not pay rent until the end of the year – whether they are trading and can afford it or not.  Of course, non-payment is simply delaying the inevitable, and could well leave them with an even more difficult financial position at the start of 2021 if and when the prohibition on forfeiture may be lifted.

However, if a landlord cannot, or will not, wait then court proceedings for non-payment of rent remain an option. A money judgment is currently still enforceable – however it may take some time to work through the court process in the current climate.

If you are a commercial landlord struggling with a non-paying tenant, it is vital to take sensible advice from experienced advisers. The commercial property litigators at Scott Bailey are experts in their field and act for a wide range of landlords throughout the area. Get in touch for more information on how our litigation solicitors can help your business.