Legal News | 29.06.21

Commercial Rent Arrears Update (June 2021)

Ring-fenced rent arrears and repayment plans – further measures to protect commercial tenants (June 2021)

On 16 June 2021, Communities Secretary Robert Jenrick announced that further legislation will be introduced to protect commercial tenants that have remained closed throughout recent lockdowns, and are therefore struggling to pay their rent.

The legislation is designed to protect tenants from the threat of eviction, in the hope that businesses retain their employees and rebuild during an extended breathing space. Existing measures to protect commercial tenants from the threat of eviction have therefore been extended to 25 March 2022.

The chief executives of trade groups UK Hospitality and British Retail Consortium (BRC) announced in recent weeks that both sectors have accrued £5bn in rent arrears. Naturally, great number businesses have simply not been able to generate the income to sustain their commercial tenancies throughout the national lockdowns. However, with more people being vaccinated each day and lockdown restrictions slowly easing, it is hoped that many of these sustainable businesses will be able to rebound, and trade their way out of rent arrears.

The government’s announcement will undoubtedly be met with some scepticism from some commercial landlords, who are unable to evict commercial tenants that have allowed rent arrears to accrue, despite continuing to trade throughout the pandemic (and therefore could pay some, if not all of the rent owing).

The government is encouraging commercial landlords and tenants to work together in respect of rent arrears that have accrued during the national lockdowns, noting that some landlords may elect to waive some of the arrears, and others will agree to extended repayment terms.

Where landlords and tenants are unable to agree a repayment plan in respect of the rent arrears, the legislation will ensure that a new arbitration process is followed and a binding agreement made. Rent arrears that have accrued during the pandemic will be ring-fenced and considered as part of the arbitration, whilst upcoming rent should be prioritised and paid.

In dealing with the issue of rent arrears, Business Secretary Kwasi Kwarteng explained: “The new arbitration process will be underpinned by law, providing commercial tenants and landlords with peace of mind that Covid-related rent debts will be settled fairly, and with finality. In the meantime, I encourage landlords and tenants to keep working together to reach mutually beneficial agreements.” Guidelines will be set out as part of the legislation, to assist the private arbitrators delivering the new process, and the arbitrators will each be approved to ensure their impartiality.

If you would like to discuss your options to recover rent arrears or your rights as a commercial tenant, please get in touch with your usual contact or email marcus.saunders@wansbroughs.com or josh.taylor@wansbroughs.com.