COVID-19 Update on Commercial Tenants' Rights Regarding Rent
This blog sets out an update to government intervention affecting commercial tenants in response to COVID-19. We are continuing to field numerous enquiries from tenants seeking advice about whether rent holidays, reductions and other concessions can be obtained in these unprecedented times.
With non-essential shops in England being into their second trading week, the recent announcement of the opening of restaurants, pubs and hairdressers from 4 July and the relaxation of the 2m social distancing rule to 1m the high street is slowly starting to return to normal. This will be the "new normal" with a condition of opening being that these shops meet the Government's COVID-19 guidelines. However, even with protective coverings and frequent cleaning, many retailers will be breathing a sigh of relief that they will be able to commence trading again.
Footfall on English high streets was up by approximately 50% on 15th June compared to the week before. However, it was still around a third less than on the same day last year. In addition, initial polling suggested that only 40% of people were comfortable returning to clothes shops. Despite being able to re-open, the difficult time for retail tenants is not over.
We have reported before on the Coronovirus Act 2020 and the remedies now available to landlords in the event of non-payment of rent. Essentially, the Act prevented landlords from forfeiting commercial leases as a result of non-payment of rent until 30 June 2020. This timescale has now been extended to 30 September 2020. If rents remain outstanding after this date the landlord will again be able to forfeit leases. In the meantime, interest will accrue on the unpaid amount, although the exact rate will depend on the terms of the lease.
Commercial Rent Arrears Recovery
As well as being unable to forfeit leases, under COVID-19 legislation landlords were prevented from serving enforcement notices on commercial tenants unless their rent arrears were at least 90 days old. This time period has now been increased to 189 days and is effective until 30 September 2020. This means that enforcement agents are unable to enter commercial properties to seize tenants' goods if the rent is unpaid for less than 189 days. After 30 September 2020 commercial tenants need only be in arrears for 7 days before this option is once again available to landlords.
The Government had also announced that use of statutory demands would be banned until 30 June 2020. This timescale has, likewise, been extended to 30 September 2020 provided that the underlying debt is unpaid due to the Coronavirus pandemic. It is not clear how it could be shown that non-payment of the debt is not as a result of the pandemic and so landlords will most likely be reluctant to attempt to use these as a method of enforcement.
With life only now showing signs of returning to normal, the extension of these protection measures gives commercial tenants some much needed breathing space. As always, the importance of continuing positive relationships and maintaining good lines of communications between landlords and tenants is paramount whilst all parties seek to understand the "new normal" and the implications that this has for their businesses.