Property Litigation solicitor, David Sodimu, discusses the Government's announcement regarding the extension of the ban on proceedings against commercial tenants.
On 9 December 2020, the Government announced in a ministerial statement that the ban on forfeiture proceedings in respect of commercial tenancies would be extended to 31 March 2021.
The Government previously imposed a ban on forfeiture proceedings relating to rent arrears, due to the coronavirus outbreak, until 31 December 2020. The Government have now extended that ban in an effort to protect commercial tenants affected by the coronavirus.
The Government have also extended the ban on the use of statutory demands, winding up petitions and Commercial Rent Arrears Recovery (CRAR), until 31 March 2021.
It is important to note the ban only relates to business tenancies subject to the Landlord and Tenant Act 1954 (“the Act”).
Whilst many landlords have shown flexibility and have been understanding of the plight of tenants in the current circumstances, the extension to the temporary ban on some of the enforcement methods available to commercial landlords for non-payment of rent has been extended to further protect the most vulnerable businesses.
The Secretary of State for Housing RT Hon Robert Jenrick MP said:
“I am extending protections from the threat of eviction for businesses unable to pay their rent until March 2021, taking the length of these measures to one year. This will help them recover from the impact of the pandemic and plan for the future.
This support is for the businesses struggling the most during the pandemic, such as those in hospitality – however, those that are able to pay their rent should do so.
We are witnessing a profound adjustment in commercial property. It is critical that landlords and tenants across the country use the coming months to reach agreements on rent wherever possible and enable viable businesses to continue to operate.”
The Government have also confirmed that further guidance to support negotiations between landlords and tenants will be published shortly.
Whilst the ban is certainly helpful to business tenants, providing certainty and protection from eviction and or winding up petitions, the ban does not prohibit landlords from issuing money claims for the recovery of rent and enforcing judgements by way of charging orders and or third party debt orders where those remedies are available.
Perhaps more importantly, the issue with the current guidance from the Government regarding rent negotiations and the further guidance to be announced, is that it is just guidance. Landlords and tenants remain free to agree new terms of leases as they wish and remain bound to honour existing terms of leases. This means that Landlords still have the ability to enforce against non-payment of rent when the ban expires, whether or not a reduction in rent is agreed with a tenant.
On 9 December 2020, the Government also announced that there would be a review of the Act in the early part of 2021. The Government confirmed that the review would look at a broad range of issues such as the LTA 1954 Part II, different models of rent payments and the impact of the coronavirus on the market.
The changes announced by the Government are significant and we wait, with baited breath, to see what changes, if any, will be made to the Act in 2021. Either way, landlords and tenants should prepare for significant changes following the review. It is expected that the changes will focus on the lease renewal process, particularly in respect of how terms are negotiated.
If you have any landlord and tenant related queries, contact David Sodimu for expert guidance and assistance through this difficult period.