The government is launching a call for evidence on commercial rents to monitor negotiations between tenants and landlords, after extending the moratorium on commercial evictions by another three months.
The commercial property moratorium, which was initially expected to end this month, has been extended to 30 June.
The call for evidence aims to set out potential next steps that the government could take after the end of June, ranging from a “phased withdrawal” of existing protections to “legislative options” targeting businesses that have suffered the brunt of the pandemic’s impact.
Issues under consideration will include the Landlord and Tenant Act 1954 Part II and different models of rent payment.
Elsewhere, six-month notice periods and the ban on bailiff-enforced evictions have been extended to 31 May for residential tenants.
The government has made £180m of funding for discretionary housing payments available this year for councils to distribute to support renters with housing costs.
A ‘wedge’ between landlords and occupiers
Mark Allan, chief executive of Landsec, said the extension would merely push back the potential cliff-edge for businesses that have “amassed considerable debt through the period and could initially struggle to repay”.
“The moratorium was an important temporary measure, but it now drives a wedge between landlord and occupier at a time when they should be working together,” Allan added.
“Nobody wants to see good businesses fail, least of all responsible landlords who have invested significant amounts in those shops, restaurants and leisure services that will be crucial to draw people back to the high street or shopping centre.
“We want to work with the government and with the retail and hospitality sectors to establish a phased withdrawal of the moratorium, giving occupiers breathing space while providing a pathway back to normal market conditions that will help drive economic recovery from Covid-19.”
‘A year late’
Melanie Leech, chief executive of the British Property Federation, criticised the call for commercial property evidence for being “a year too late”.
“Alongside the independent data published quarterly, we have already provided extensive evidence of the way in which property owners are supporting their tenants and creating new sustainable partnerships which work for both parties,” said Leech.
“We await further details on what more is required – and on how the government proposes to ensure that the local authorities, pensions and savings funds invested in commercial property are finally able to see light at the end of the tunnel after a year with little or no income.”
She added that while the majority of tenants and property owners have been working well together during the pandemic, there is “a minority where relationships have broken down and become toxic”.
Leech said: “The continuation of the moratorium will do nothing to unlock the stalemate and allow the market to reset and recover.”
She added that the scandal of well-capitalised businesses that can pay rent but have chosen not to “cannot be allowed to continue”.
“Their behaviour has raided our nation’s pensions and savings invested in commercial property, and has been a heavy blow for already stretched local authority landlords and public finances,” Leech said.
Decision will ‘clog up the courts’
Alison Hardy, partner at law firm Ashurst, said that the decision would likely result in more landlords “drawing down on rent deposits, recovering monies from guarantors and clogging up the courts with debt actions”.
“The High Court has seen so many debt claims being issued by landlords for rent arrears that it is starting to triage those claims and push them down to the Central London County Court Chancery List,” said Hardy.
She added that a similar extension on the ban on statutory demands and winding-up petitions is expected to follow.
“That, together with extension of the government support packages and some pending court challenges to CVAs, is likely to see insolvencies put off for a further period of time,” Hardy said.
David Haines, partner at law firm Charles Russell Speechlys, said the decision to extend the rent moratorium again “delivers another blow to commercial landlords”, with commercial rent arrears already totalling an estimated £4.5bn.
He said: “This further extension may be postponing the inevitable and effectively ‘kicking the can down the road’, by which time unpaid arrears may only be greater and some businesses less likely to be able to recover.
“The restrictions, which have been in place for nearly a year now, being extended again will no doubt come as welcome temporary relief for struggling businesses, although the message remains that businesses should pay their rent where they can do so. However, this has certainly not been happening in all cases.
“Ultimately, the government should also seek to provide more support for landlords, some of whom are now facing over a year of rent shortfalls, as well as their tenants.”
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