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Government asks landlords and tenants for views on commercial rents and Covid pandemic

The government moratorium on landlords, that prevents the forfeiture of a lease for non-payment of rent, comes to an end on 30 June. Landlords and tenants are now being asked for their views on what should happen next.

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Published 21 April 2021

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The government moratorium on landlords, that prevents the forfeiture of a lease for non-payment of rent and on the statutory use of winding up orders, will come to an end on 30 June. Whilst the government has extended these restrictions on two previous occasions, it is unlikely to do so again.

These restrictions sit alongside the ‘Code of practice for commercial property relationships during the Covid-19 pandemic’ that recommends tenants pay what the reasonably can and that landlords act reasonably including the granting of concessions and deferred payment of arrears. This code, whilst helpful, is non-binding and does not offer a suitable post-Covid long term arrangement.

The government in its consultation recognises that these restrictions “cannot and should not continue indefinitely” and that “a carefully managed exit is necessary to preserve tenant businesses and the millions of jobs that they support”.

This consultation recognises the importance of tenants’ businesses and the jobs that they provide. It says that “if there is evidence that productive discussions between landlords and tenants are not taking place, and that this represents a substantial and ongoing threat to jobs and livelihoods, the Government will not hesitate to intervene further”.

The government does, however, recognise the need for commercial property market to engage and support its final proposal. Although, notably, the wider review of landlord and tenant legislation announced by the Government last November are excluded from this consultation. 

The government is considering both regulatory and legislative options to protect viable businesses and jobs. The government consultation puts forward six options that it is asking landlords and tenants to consider and comment upon:

  • Option 1 – allow the moratoria against forfeiture and Commercial Rent Arrears Recovery (“CRAR”) to lapse on 30 June 2021;
  • Option 2 – allow the moratorium against forfeiture to lapse on 30 June 2021 but retain the insolvency route restrictions and CRAR moratorium for a period of time;
  • Option 3 – target existing measures to businesses based on the impact that COVID restrictions have had on their businesses for a limited period of time;
  • Option 4 – encourage increased formal mediation between landlords and tenants;
  • Option 5 – non-binding adjudication between landlords and tenants; and
  • Option 6 – binding non-judicial adjudication between landlords and tenants.

Collyer Bristow believes that Option 1 can be largely discounted: the government, we believe, is disinclined to simply allow the restrictions to be lifted otherwise it would not be holding this consultation.

This consultation also looks to favour the position of tenants over landlords and specifically excludes the use of Company Voluntary Arrangements (CVAs) which many landlords believe are open to abuse.

However, this is the first and perhaps only time the government will turn to landlords and tenants for their views and it is important that all voices are heard.

We would urge our clients and contacts, whether landlords or tenants, to participate in this consultation which closes on 4 May. Collyer Bristow’s commercial real estate team are on hand to answer any questions.

The consultation can be found here – Commercial rents and COVID-19: call for evidence – GOV.UK (www.gov.uk) or Commercial Rents and COVID-19 Call for Evidence – Ministry of Housing, Communities and Local Government Citizen Space – Citizen Space

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Shorter Reads

Government asks landlords and tenants for views on commercial rents and Covid pandemic

The government moratorium on landlords, that prevents the forfeiture of a lease for non-payment of rent, comes to an end on 30 June. Landlords and tenants are now being asked for their views on what should happen next.

Published 21 April 2021

Associated sectors / services

  • Real estate disputes
  • Commercial real estate

Authors

The government moratorium on landlords, that prevents the forfeiture of a lease for non-payment of rent and on the statutory use of winding up orders, will come to an end on 30 June. Whilst the government has extended these restrictions on two previous occasions, it is unlikely to do so again.

These restrictions sit alongside the ‘Code of practice for commercial property relationships during the Covid-19 pandemic’ that recommends tenants pay what the reasonably can and that landlords act reasonably including the granting of concessions and deferred payment of arrears. This code, whilst helpful, is non-binding and does not offer a suitable post-Covid long term arrangement.

The government in its consultation recognises that these restrictions “cannot and should not continue indefinitely” and that “a carefully managed exit is necessary to preserve tenant businesses and the millions of jobs that they support”.

This consultation recognises the importance of tenants’ businesses and the jobs that they provide. It says that “if there is evidence that productive discussions between landlords and tenants are not taking place, and that this represents a substantial and ongoing threat to jobs and livelihoods, the Government will not hesitate to intervene further”.

The government does, however, recognise the need for commercial property market to engage and support its final proposal. Although, notably, the wider review of landlord and tenant legislation announced by the Government last November are excluded from this consultation. 

The government is considering both regulatory and legislative options to protect viable businesses and jobs. The government consultation puts forward six options that it is asking landlords and tenants to consider and comment upon:

  • Option 1 – allow the moratoria against forfeiture and Commercial Rent Arrears Recovery (“CRAR”) to lapse on 30 June 2021;
  • Option 2 – allow the moratorium against forfeiture to lapse on 30 June 2021 but retain the insolvency route restrictions and CRAR moratorium for a period of time;
  • Option 3 – target existing measures to businesses based on the impact that COVID restrictions have had on their businesses for a limited period of time;
  • Option 4 – encourage increased formal mediation between landlords and tenants;
  • Option 5 – non-binding adjudication between landlords and tenants; and
  • Option 6 – binding non-judicial adjudication between landlords and tenants.

Collyer Bristow believes that Option 1 can be largely discounted: the government, we believe, is disinclined to simply allow the restrictions to be lifted otherwise it would not be holding this consultation.

This consultation also looks to favour the position of tenants over landlords and specifically excludes the use of Company Voluntary Arrangements (CVAs) which many landlords believe are open to abuse.

However, this is the first and perhaps only time the government will turn to landlords and tenants for their views and it is important that all voices are heard.

We would urge our clients and contacts, whether landlords or tenants, to participate in this consultation which closes on 4 May. Collyer Bristow’s commercial real estate team are on hand to answer any questions.

The consultation can be found here – Commercial rents and COVID-19: call for evidence – GOV.UK (www.gov.uk) or Commercial Rents and COVID-19 Call for Evidence – Ministry of Housing, Communities and Local Government Citizen Space – Citizen Space

Associated sectors / services

  • Real estate disputes
  • Commercial real estate

Authors

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