Extension of Commercial Eviction Ban Lacks Clarity, Says Lawyers

The Government has announced that the ban on the eviction of commercial tenants who have failed to pay rent will be extended until March 2022, following pressure from businesses affected by the continuation of coronavirus restrictions.

While this news will be welcome for some businesses, particularly those in the hospitality sector, commercial landlords have been left feeling frustrated and property litigation lawyers say the announcement is lacking clarity.

Communities Secretary Robert Jenrick stated that legislation will be introduced to ringfence outstanding unpaid rent that has built up when a business has been unable to open during the pandemic. Landlords are expected to make allowances for the ringfenced rent arrears from those specific periods and share the financial impact with their tenants.  If landlords and tenants cannot agree on how the burden of arrears should be shared the new legislation will force them to a binding arbitration.

Nicola Seager, a partner and property litigation specialist with national law firm, Clarke Willmott LLP, said: “As ever this latest announcement is lacking in detail so we will have to wait to see exactly what will be included in the latest measures. We need to see the proposed legislation quickly as currently no-one knows what, if anything, can be done if the quarterly rents due on 24 June are not paid.

“The statement suggests that the new restrictions will be sector specific and that businesses not prevented from working will not be protected once the new legislation is passed. However, repeating that tenants should pay as soon as they are allowed to open is not enough for landlords – they will want to see the promised new legislation deal with that specifically and confirm that the restrictions will not apply to pre-March 2020 rent or rent due when businesses are not prevented from trading.

“Once it was announced that the total lifting of restrictions was to be moved from 21 June to 19 July some measure of further extension to the protections to commercial tenants was expected, but preventing forfeiture or the seizing of assets until March 2022 goes far beyond the measures which have been discussed within the industry.

“While we expected a sector specific approach and ringfencing of rents for periods of enforced closure and pandemic related trading issues, it is hard to see how a binding arbitration will help.  Perhaps that is intended to free up the courts by removing the large number of rent claims we are now seeing.”

The announcement also stated that the current restrictions preventing the use of a statutory demand to found a winding up petition and preventing the issue of a winding up petition against a debtor company, unless the petitioner can establish that the debtor company has not been prejudiced by the pandemic or would have been in the same position, even without the effects of the pandemic, will continue until 30 September 2021.

Nicola continued: “The Government has made this decision to help protect jobs and livelihoods, particularly for nightclubs and other hospitality businesses. Landlords will note that the help does not extend to continuing the business rates holiday so tenants are expected to pay rates but not rent potentially.

“We always advise our clients to work together and encourage clear and regular dialogue between landlords and tenants. A good relationship is all the more important now.”

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Southampton and Taunton.

For more information visit www.clarkewillmott.com