Extension of ban on landlord’s evicting tenant companies
A ban on landlords evicting companies for unpaid commercial rent is to be extended for another 9 months. The ban, which stopped landlords taking tenants to court for non-payment, was to end on 30 June 2021.
The Government has indicated that the recently announced further delay of easing lockdown restrictions would present challenges to business. This is all against the backdrop of retail and hospitality companies being in rent arrears of an estimated £5bn. Of course, retailers and hospitality firms welcomed the measures, landlords are unhappy and pointed out that some wealthier tenants were abusing the ban to avoid paying rent they would have no problem being able to pay.
The Government also announced that existing measures will stay in place, including extending the current moratorium to protect commercial tenants from eviction to 25 March 2022. Also part of the announcement was a plan for a binding arbitration scheme to resolve disputes between commercial landlords and tenants and that scheme is likely to be in place for when the eviction ban is lifted. The Government is trying to strike a fair balance between protecting landlords and supporting businesses most in need. Just the same all tenants should consider paying rent again in accordance with their lease terms or as agreed with their landlord once restrictions are removed if they are not already doing so.
Many companies, particularly in the hospitality sector, still cannot trade normally, including nightclubs and leisure firms. In April 2020 the government blocked legal attempts to evict shops, restaurants and other businesses that had stopped paying rent, as part of emergency measures to soften the economic impact of the pandemic. Hospitality leaders had called for an extension of the moratorium and for more financial support from the government.
A timely extension
Many retail tenants feared a tsunami of claims from landlords and so the government announced extension will allow landlords and tenants time to compromise and negotiate with retailers needing that extra time to trade their way out of debt and cover rent arrears
Build-up of rent arrears
The ban on tenant evictions was just one of the government support measures that is due to expire on 1 July 2021. A business rate holiday will end with companies being asked to pay 33% of their normal bill – rising to 100% by March 2022. Extending this measure would be very expensive for the government. But extending the eviction ban leaves the cost firmly with commercial landlords and in default of rent arrears payments or agreement to make up the arrears will be left with no choice but to issue court claims.
The government has said that the extension to March 2022 would allow for new legislation to create an arbitration system to resolve disputes between commercial landlords and tenants. Landlords of all sizes have complained that they will have received no income from tenants who did not want to pay, even if they could, for two years by March 2022. But for support from their own banks landlords say that they would not have survived and they continue to rely on the goodwill of their banks – for now.
Rent arrears claims
Many commercial tenants/businesses will be relieved that landlords cannot sue them until at least March 2022. But unless rent arrears are paid and/or alternative dispute resolution between landlords and tenants sees a compromise being reached time will tell if claims from landlords for non-payment of rent will tax the resources of the Court Service.
The Commercial Property Disputes team at Hodge Jones & Allen are highly experienced in this specialist area of the law. If you are facing eviction and in need of legal advice, please call 0808 252 5231 or request a call back.