24/06/2020

Commercial Property |Commercial Rents – Extra Protection for Tenants

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The Government has confirmed that it will extend the time period for suspension of the forfeiture of evictions from June 30 to September 30.

Additionally, they have introduced the Code of Practice for Commercial Property.  The idea of the Code is to provide clarity for businesses when discussing rental payments and to encourage best practice so that all parties are supported.  Whilst the Code is voluntary it encourages tenants to continue to pay their rent in full if they are in a position to do so and advises that others should pay what they can, whilst acknowledging that landlords should provide support to businesses if they too are able to do so. 

Key points are:

  • Government to lay a statutory instrument to amend the Coronavirus Act to extend the time period for suspension of the forfeiture of evictions from June 30 to September 30, meaning no business will be forced out of their premises if they a miss a payment in the next three months.
  • Government to lay secondary legislation to prevent landlords using Commercial Rent Arrears Recovery unless they are owed 189 days of unpaid rent. The time period for which this measure is in force will be extended from June 30 to September 30. 
  • An amendment to the Corporate Insolvency and Governance Bill has been tabled which will extend the temporary ban on the use of statutory demands and winding-up petitions (where a company cannot pay its bills due to coronavirus) until 30 September

Tenants need to remember however that, unless a different agreement has been reached, rental payment is only deferred, not written off, meaning that once the protection ends Landlord’s can pursue debts of half a year’s rent or more, plus interest, plus costs – leading to forfeiture and insolvency proceedings. 

Landlords still have the option of suing for the debt which could result in the tenant being subject to a CCJ.  Whilst this would not lead to a possession claim or insolvency (these doors are still closed) it might put sufficient pressure on a tenant to move rent to the top of the list of bills to pay. The majority of tenants will want to avoid being subject to a CCJ.

Additionally, where there is a guarantor in place Landlord’s have more options as guarantors are not protected by any of the recent legislation.

In our view the best practice to adopt involves engaging with your Landlord or your Tenant, as a lack of communication can often lead the other party to reach conclusions that are not helpful.  Keep talking, know where you stand, and seek advice where required.  We are happy to offer help and advice – in the first instance please speak to Rob Pettigrew at Thursfields Solihull on 0121 796 4022 or rpettigrew@thursfields.co.uk or any of the Commercial Property team here at Thursfields Solicitors.

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Robert Pettigrew,

Director, Commercial Property & Retail and Leisure

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