A vast number of businesses in the UK have in some way been affected by COVID-19. Whether that be in having to place employees on furlough leave because of a downturn in work, or having to close their doors completely as a result of strict lockdown and social distancing measures put in place in order to protect public health, the impacts have been far reaching.
It is not always the case that the premises from which a business trades are their own. It is commonplace for business owners to rent their premises from a landlord under the terms of a commercial lease or commercial tenancy. Under the terms of their occupation, as tenants, they will be required to pay rent to their landlord on a regular basis. COVID-19 has been a main reason for many businesses being unable to meet their rental obligations.
As part of the ongoing measures to help protect these businesses, the jobs of employees working in these businesses and the UK economy at large, the Secretary of State for Housing, Communities and Local Government, Rt Hon Robert Jenrick MP on 16th September 2020 announced further measures to reassure business owners (as commercial tenants) who may be fearing the threat of eviction as a result of outstanding rent arrears, saying:
“I am announcing today that we are extending support to protect those businesses that are unable to pay their rent from eviction to the end of the year. This will stop businesses going under and protect jobs over the coming months.
“This government is committed to supporting businesses and our high streets at this difficult time, and this extension of support will help businesses recover from the impacts of the pandemic and plan for the future.”
The government has also announced a further measure in that they will be extending the restriction on landlords being able to use the “Commercial Rents Arrears Recovery” (which means using bailiffs to collect the rent by seizing goods belonging to the tenant) to enforce unpaid rent on commercial leases, until the end of the year.
These latest measures are aimed at supporting those businesses who have been worst hit since the outbreak of COVID-19. The measures aim to provide these businesses with some reassurance about their short term future and give them a chance to focus on rebuilding their businesses over the autumn and Christmas period. It also seeks to avoid the devastation of the high street by landlords evicting struggling businesses.
Whilst the above measures have been put in place, the government has made clear that where tenants are in a position to pay rent, they should continue to do so. Where a tenant is in rent arrears, the government guidance is clear that both landlords and tenants should actively engage with one another in order to agree rent repayment options wherever possible. In June 2020, the government issued a Code of Practice which was designed to be used by landlords and tenants to assist in these types of discussions.
Landlords and tenants must not assume that just because the government has extended the above measures until the end of 2020 that they are guaranteed to be extended into 2021. The government will no doubt continue to review the position over coming months and take whatever steps it considers necessary to balance the interests of landlords and tenants.
It has been made clear from the outset that these measures do not eliminate a landlord’s right to collect the outstanding rent, the measures merely allow tenants to defer the payment of rent whilst they establish their businesses once again. It remains that tenants will be liable for all payments due to their landlords under the terms of their leases or commercial tenancies, and once the restrictions on these enforcement options are lifted, if a tenant doesn’t have an agreement in place with their landlord to pay what is owed, they will be exposed to the risk that their landlord will terminate the tenancy at that point.
Smith Partnership specialise in all aspects of commercial landlord and tenant matters. If you are a landlord or tenant of a commercial premises and you wish to discuss any matters that we may be able to assist with, please feel free to contact our Partner and Head of Dispute Resolution, Russell Davies on 01332 225381, who will be happy to assist.