The Treasury has extended the ban on commercial tenant evictions to 25 March 2022.
The moratorium on evictions was set to expire at the end of this month. However, Steve Barclay, chief secretary to the Treasury, told Commons today (16 June) that it will now continue for a further nine months.
Barclay said the government plans to introduce legislation to support the “orderly resolution” of debts that have amassed from Covid-19 closures. This would be in place when the moratorium is lifted.
Rent arrears built up during pandemic closures will be ringfenced, with landlords expected to make allowances for these amounts owed and “share the financial impact”.
A new binding arbitration scheme will be introduced as a “backstop”, to help resolve disputes between landlords and occupiers arising from failed negotiations over existing debts. This will be delivered by private arbitrators, who will go through an “approval process” to prove their impartiality.
A separate ban on winding-up petitions and statutory demands will continue for three months until 30 September this year. Restrictions on using the commercial rent arrears recovery process will also be extended.
Barclay said: “We believe this strikes the right balance between protecting landlords and supporting those businesses that are most in need.”
He added: “To be clear, all tenants should start to pay rent again, in accordance with the terms of their lease, or as otherwise agreed with their landlord.”
The decision is likely to send shock waves through the property industry, which last week raised concerns that the ban mainly serves to allow well-capitalised retailers to avoid making rent payments.
Commercial rent arrears since March 2020 have grown to more than £6bn, according to estimates from Remit Consulting.
Hannah Day, real estate lawyer at global law firm Linklaters, said: “Throughout the last year, many landlords have been keen to support tenants by offering rent concessions where possible, but as debt piles up and as the measures are extended once again, investors and funders may be starting to lose patience.
“Further delays will do nothing to reduce the increasing pile of unpaid rent, nor do they address the calls from the commercial property industry for a more balanced approach.”
However, the move has been welcomed by retailers and hospitality operators, which have outlined fears that the lifting of the moratorium would lead to a wave of evictions.
Helen Dickinson, chief executive of the British Retail Consortium, said: “This is a very welcome announcement, addressing an issue of vital importance in the nick of time. We will be looking closely at the details, but welcome the continued support provided by government to businesses.
“Just as retailers feared a wave of legal action by landlords, the government has stepped in to offer both landlords and tenants more time to negotiate. The last 15 months have seen extended periods of forced closure for retailers, preventing many from making the turnover needed to cover rents. Retailers need time to trade their way out of debt; this announcement does exactly that.”
Earlier this week, prime minister Boris Johnson announced that the lifting of lockdown measures has been delayed by four weeks to 19 July.
The news of the moratorium extension comes after the government issued a call for evidence from landlords and occupiers in April, which concluded last month.
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