UK Government halts Commercial Property Evictions
On 19 June 2020 the UK Government made an important announcement for tenants of commercial properties who are unable to pay rent due to the coronavirus crisis.
The UK Government plans to introduce the following key changes in England and Wales:
- Voluntary code of practice for landlord and tenants to resolve rent arrears and other issues. This applies to all businesses with commercial leases in any sector which have been impacted by the coronavirus crisis.
- Suspension of forfeiture for commercial property leases if the tenant is in rent arrears. A statutory instrument will extend the date a landlord can forfeit the lease from 30 June 2020 to 30 September 2020.
- Suspension of Commercial Rent Arrears Recovery unless rent arrears remain unpaid for 189 days. The time for enforcement will be extended from 30 June 2020 to 30 September 2020.
The above measures have been implemented to prevent struggling businesses from eviction over the summer and help with the economic recovery.
The aim is for tenants and landlords to be transparent in their discussions and to act reasonably and responsibly whilst recognising the impact that coronavirus has had on businesses’ finances. In the current crisis, it is best to promote good practice between landlords and tenants.
What steps can landlords take to recover commercial rent arrears?
It is important to note the protection afforded to tenants specifically relates to rent arrears. Landlords are able to forfeit a commercial lease for any other reason permitted under the lease, but it is advised to serve notice under Section 146 of Law of Property Act 1925 to set out those breaches and whether they are capable of being remedied.
The following actions are still available to landlords seeking to recover rent arrears:
- A claim in the County Court against the tenant for rent arrears;
- A claim in the County Court against the tenant’s guarantor (where appropriate) for rent arrears;
- Charge interest on the rent arrears. This depends on the terms of the lease.
- Draw down of the rent deposit. This depends on the terms of the rent deposit deed.
- Commercial rent arrears recovery. See restrictions on this option as set out above.
The UK government has provided a number of financial measures to support businesses during the economic emergency such as: Coronavirus Job Retention Scheme, deferral of VAT payments, loans to support businesses and more. This should help facilitate income for businesses to allow them to make payment of rent to landlords.
Leigh Sunter, a solicitor specialising in Property Litigation, comments: “The code of practice encourages tenants to continue to pay their rent in full, if possible. For tenants unable to pay full rent they should pay what they can. Also, the landlords should provide support to tenants if they are able to do so such as deferred payment schemes or to spread the rent arrears across a period of time. One hopes common sense will prevail.
Commercial landlords are facing exceptional circumstances. For struggling landlords we are happy to pursue tenants for rent arrears on a deferred payment scheme, depending on the terms of the lease.”Subscribe to our newsletter
Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
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