Following on from my previous article, the government have now announced measures to protect tenants from “aggressive rent collection” during the current pandemic lockdown.
What is proposed
In an announcement made on the 23rd April, the government plans to introduce a temporary ban on statutory demands and winding up petitions being issued to commercial tenants. The intention is to ease the pressure on companies who are already suffering the financial strain of the coronavirus. There will also be further legislation preventing landlords from using the Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent, thus giving further breathing space for tenants to pay their rent.
Impact on landlords
Whilst the measures will be welcomed by tenants, for those landlords who rely on their rental income to pay their day to day bills, they may be left feeling that their needs are being overlooked. The issuing of a statutory demand and therefore threat of a winding up petition is often enough to trigger a tenant who has not paid their rent, into settling their account. But in these difficult times, such methods are fruitless if the tenant truly does not have the cash and the result is they are pushed into bankruptcy or insolvency, leaving a landlord with a void.
Dialogue between a landlord and tenant needs to be ongoing
It is therefore important to reiterate again that the dialogue between landlord and tenant needs to be ongoing, with regards to rents due now and in the future, so that the landlord’s rental income stream is protected but to ensure the tenant can effectively manage their cash flow to enable a prompt and full recovery once normal service is resumed. Other options remain available to landlords for recovering outstanding rents, from drawing on existing rent deposits, issuing a debt claim at court or seeking to pursue guarantors or formers tenants under the lease where they may have a continuing liability.
What happens next…?
The government have not announced any measures to assist those landlords who may be suffering their own liquidity issues as a result of the Covid 19 lockdown, but there has been some suggestion from commentators on the subject of a rent furlough scheme, thus providing some much needed funding to those who currently need it. We will have to watch and wait to see if this comes to fruition.
If you are tenant requiring advice on negotiating a rent reduction or payment holiday with your landlord or if you are a landlord needing assistance from our commercial property team with managing tenants who wish to agree alternative payment terms for their lease, then please get in touch with firstname.lastname@example.org who will be happy to help.
The government’s press release is available here: https://www.gov.uk/government/news/new-measures-to-protect-uk-high-street-from-aggressive-rent-collection-and-closure