With a second national lockdown currently underway, commercial landlords are facing challenging circumstances. Since the government’s temporary measures to protect commercial tenants from eviction and Commercial Rent Arrears Recovery (CRAR) were put in place back in March, many landlords have felt their hands are tied, as they continue to watch arrears build up with no definite end in sight.
It’s understandable that the government wants to protect businesses from the challenges this pandemic has brought, but legislation so far has generally been weighted to protect those businesses who pay rent, rather than the landlords themselves.
This has left commercial landlords facing limited recourse for action, anxiety over their own income, and uncertainty for the future. However, it’s important to remember that while limited, there are still legal tools you can use to protect and reclaim your rental income.
What are the key measures currently in place?
- The Coronavirus Act 2020, which came into force in March, prohibits landlords from terminating a lease due to non-payment of rent (in this case rent is defined as including service charges, insurance and interest.), until the end of December 2020. It’s important to note this specifically refers to rent arrears incurred as a direct cause of the pandemic. It also applies to both pursuing court proceedings, and physically entering and reclaiming a property.
- Landlords cannot carry out arrears’ recovery, unless those arrears total 276 or more days’ worth of debt. And from the 25th December 2020, this will increase to 366 days’ net unpaid rent.
- Since the introduction of the Corporate Insolvency and Governance Act 2020, from 25 June onwards, commercial landlords can no longer use statutory demands and petitions to recover rent owed, until 31 December 2020. The exception is if you have ‘reasonable grounds’ to believe your tenant’s financial difficulties have not been caused by the pandemic and would have occurred anyway.
Where does this leave commercial landlords?
Although the measures currently in place undoubtedly limit the ability of commercial landlords to recover arrears, there are still ways to proceed, depending on the nature, and extent, of a tenant’s debts.
Where tenants are unwilling, or unable, to agree to repayment terms or negotiate ways to clear their arrears, for example, it may still be possible to issue a debt claim at court, following the correct procedures. It’s also possible to file a CCJ against a tenant, with an eye to enforcing this once the current restrictions are relaxed.
And it’s also worth seeing whether there are any enforceable guarantees, such as an Authorised Guarantee Agreement, which will enable you to pursue a guarantor to recoup your arrears.
Often, placing this kind of pressure on tenants is enough to encourage them to comply with their lease agreement, or at the very least speak to you about repayment options.
As amendments and extensions continue to be added to the current legislation, the rights and available options to commercial landlords are regularly changing during these challenging times.
The Attwells team are following the situation closely and are here to help you with any issues you face with your commercial tenancies. For more help call Will Oakes on 01206 239764.