Government to provide further help to commercial tenants
27 April 2020
On 23 April 2020, the Government announced a further rescue package for commercial tenants who are struggling to pay their rent.
For retailers and other businesses who have been forced to close their premises, the changes should give some much needed breathing space to get them through the crisis.
This comes off the back of last month’s new legislation temporarily preventing landlords from changing the locks on a commercial tenant if they fail to pay the rent. By itself though, a temporary stop on evictions did not prevent landlords from demanding payment and from threatening to push their tenant into liquidation if they were unable to comply. The Government has now decided to go further and provide more help so that as many companies as possible are able to stay afloat.
The expected changes will include:
- preventing landlords from serving statutory demands and applying for winding up orders solely on the basis that a tenant cannot pay due to the current crisis
- preventing landlords from sending in bailiffs under the Commercial Rent Arrears Recovery scheme (CRAR) to seize assets unless 90 days or more of rent is unpaid.
The new legislation is expected to be introduced imminently and will be in place until 30 June 2020 initially.
Importantly for tenants, the new rules are not expected to go as far as saying that the rent is not due; in most cases it still will be and tenants will still be obliged to pay. The changes simply stop a landlord from taking certain immediate enforcement steps so as to allow struggling tenants to continue in business whilst the crisis continues. The Government are also keen to encourage landlords and tenants to agree sensible payment terms between themselves where possible.
We will be carefully looking at the detail of the new legislation once available to understand the extent of the ban. It is an unknown at the moment for example whether all landlords will be prevented from serving statutory demands or whether it will only apply to those tenants who genuinely cannot pay due to COVID-19 rather than those who have cash but would prefer not to spend it.
It also remains uncertain how tenants will be able to manage to pay their rent in the months to come when these temporary changes are lifted and landlords can pursue payments again as normal. It may well be that the Government will step in again to manage the process and further changes could well be made to help spread the arrears over the remainder of the lease term.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2020.