The restrictions on the actions available to landlords as a result of the ongoing pandemic are constantly changing.
Here, Daniel Long takes a look at what the most recent updates mean for landlords and their tenants.
Landlord options remain limited
As the effects of the pandemic began to hit, the government unveiled an unprecedented package of support for both commercial landlords and tenants.
This initially meant a moratorium on forfeitures, other measures to support tenant businesses, making more than £300billion available in loans, and a range of schemes including business rate relief and the Coronavirus Job Retention Scheme.
Now some restrictions are being lifted, the sector is getting used to a new way of operating.
Unfortunately, there will be instances where landlords do need to take action against tenants. For the time being at least, options are still significantly limited and will remain so for a number of months.
For instance, a ban on forfeiture for non-payment of rent was due to end on June 30 but has been extended until September 30 at the earliest.
The increase in the level of rent arrears required to trigger Commercial Rent Arrears Recovery (CRAR) has been increased from 90 to 189 days – effectively two quarters of the year. This has also been extended until September 30.
The long-awaited Corporate Insolvency and Governance Bill has also introduced key points for landlords to be aware of, dealing with issues including prohibiting presenting winding-up orders where non-payment is COVID-19 related. The measures introduced by the Bill are also in place until at least September 30.
Landlords may still be able to pursue arrears from sub-tenants, former tenants or guarantors in certain circumstances and may be able to draw down from any rent deposit that is held.
A new way of working – backed by a code of conduct
As both landlords and tenants get used to a new way of working, the government has published a new ‘Code of Practice for commercial property relationships during the COVID-19 pandemic.’
The full code can be seen on the government’s website here but it is intended to ‘reinforce and promote good practice amongst landlord and tenant relationships as they deal with income shocks caused by the pandemic.’ It will form the backbone of how landlords and tenants are expected to work together post-lockdown.
The code is entirely voluntary but is backed by a range of leading organisations including the British Retail Consortium. Key points include recommendations for reducing service charges where necessary and encouraging landlords and tenants to work together where rent is unable to be paid in full.
Working together to find a solution
All of the above factors mean it is more important than ever for landlords and tenants to work together to find agreeable solutions.
Landlords may be prevented from forfeiting a tenant’s lease for non-payment of rent but the tenant will usually continue to be liable for that rent – plus interest. The Government has also made clear in its new code of conduct that ‘tenants who are in a position to pay in full should do so’.
Landlords and tenants are being encouraged via the new code of conduct to look at solutions like:
- A full or partial rent-free period
- Payment of rents over shorter periods (e.g. monthly rather than quarterly)
- Agreements to split the cost of the rent during an unoccupied period.
It’s in everyone’s best interest to find a way through the next few months and hopefully a stronger financial future for all parties awaits.
For further advice on this or any other landlord and tenant law matter, call Daniel Long on 0161 761 8063 or email him at daniel.long@whnsolicitors.co.uk
