When the Covid-19 crisis forced the country into lockdown back in March, many businesses, in many sectors, were forced to close their doors to employees, clients and customers alike.
In response, the Government announced a temporary ban on evictions of commercial property tenants. A move that was welcomed, initially, as a way of securing the longer-term future of certain companies and, in turn, the jobs of their staff.
In September the ban, which prevents landlords evicting commercial tenants behind on their rent payments, was extended until the end of 2020 at least, in order to give struggling high street retailers and restaurant chains a chance to “focus on rebuilding their business over the autumn and Christmas period”.
While the government is clear that where businesses can pay their rent, they should do so, and that all rent arrears must be repaid once restrictions are lifted, many landlords now face additional financial uncertainty following what has already been a difficult year.
Here, Head of Business Legal Services, Stephen Gordon provides some insight into current rules and the options that are available for any commercial property owners impacted by the indefinite moratorium.
When will the temporary commercial eviction ban run until?
The Government announced that landlords would not be able to evict tenants for non-payment between 26th March and the 30th June. This has since been extended twice and will now run until the 31st of December. A further extension has not yet been ruled out.
My tenant has not been keeping up with rent payments what can I do?
The Government has published a Code of Practice for commercial property relationships during the COVID-19 pandemic which although is a voluntary agreement, should be acknowledged by both landlords and tenants.
In this it clearly states that both landlords and tenants should be in open conversations with each other and should work collaboratively and transparently to come to an agreement that will aid a shared recovery.
It states that if tenants can make rent payments they should do so in full, and if they have received any Government funding in response to the pandemic this should be used to make rent payments and other property finances.
If they are struggling to make these payments in full, they should clearly outline why and show how they expect to pay this back when the eviction ban is lifted.
At this point you may want to request financial details which provide an overview of the tenant’s loss of business during the coronavirus ‘lockdown’ period and their projections for the rest of the financial year. This may help you to plan for the future and forecast when you expect these payments to be made.
My tenant is asking for a rent concession what should I do?
When making rent concession agreement, we always strongly recommend both parties involved have legal representation so that both parties are fully aware of the restraints of the agreement.
When considering this option it is worth looking over the tenants previous behaviours in terms of making payments and if you have concerns you may want to look to see if any of their wider stakeholders would be able to make payments on their behalf if the need arose.
When considering rent concessions there are six main options you can progress:
- Rent reductions
- Rent deferrals
- Turnover rents
- Monthly rent payments
- Drawing rent from a deposit
- Waiver of interest
When making these agreements it may be worth considering if these will run to a fixed date or if there will be trigger points to review the contract. You may also look for the tenant to make a concession such as take a lease extension or remove a breakout clause from the original contract.
I’m struggling to cover the cost of my rented properties. What can I do?
The UK Government is encouraging landlords to engage with their lenders and finance providers to seek support with their existing financial arrangements as needed.
What are my options if my tenant does not meet existing or revised payment plans once the ban is lifted?
If your tenant is still not able to make payments, you may want to instruct a lawyer to assist you with:
- Recovery of commercial rent areas – This is where a landlord can seize tenants’ assets to cover unpaid costs
- Forfeiture of leases
If you are a commercial landlord and have concerns about any of your properties please speak to our Commercial Property and Disputes Resolution teams to see how we can help you through this challenging time. Appointments are available over the phone and via video chat for your convenience.