The COVID situation has resulted in many commercial tenants of business premises being unable to pay their rent. Over recent months, there have been a number of government COVID announcements designed to assist business tenants. Throughout, the government has made it clear that tenants should pay their rent where they are able to do so but the government has recognised the unprecedented impact on the income of commercial business tenants brought about by lockdown.
Businesses will be protected from the threat of eviction until the end of 2020. This means that commercial tenants cannot be removed from their property before that date – the idea is to give businesses the chance to recommence trading.
Commercial Rent Arrears Recovery (CRAR) is a statutory procedure allowing landlords of commercial premises to recover rent arrears by taking control of the tenant's goods and selling them. The government has confirmed that it will extend the restriction on landlords using CRAR to enforce unpaid rent on commercial leases until the end of 2020.
In June 2020 the government published a code of practice for the commercial property sector specifically to encourage commercial landlords and tenants to work together during the COVID 19 pandemic with a view to protecting viable businesses.
The code applies to all commercial leases held by businesses which have been 'seriously negatively impacted' by the COVID 19 crisis. The parties are encouraged to act reasonably and responsibly and to act transparently and in good faith. Tenants seeking concessions should be clear with their landlords as to why this is needed including the provision of financial information about their business. The code includes a number of suggestions and outcomes to assist including: the agreement of a full or partial rent-free period, a deferral of rent for specified periods or rent reductions. Landlords could draw from rent deposits held on tenants behalf on the basis that they would not subsequently require this to be 'topped up' by the tenant.
In all cases, commercial landlords and tenants are encouraged to work together and both parties may feel that this is best achieved by taking specialist legal advice.
To discuss this or any other landlord and tenant matter, please contact us.