uncertain and challenging times.
The Government announced on 23 March that there will be relief from forfeiture for tenants who do not pay their rent in the 3 next months – see here for full details.
This means that no business will be forced out of their premises if they miss a rent payment in the next 3 months.
What the Government has said:
Robert Jenrick Housing Minister has stated :
“We are protecting both people and their businesses by providing the urgent support they need.”
“We know many commercial landlords are already setting a great example by working closely with tenants and offering rent deferrals or holidays.”
“However, these new measures will provide reassurance to businesses struggling with cashflows and ensure no commercial tenant is evicted if they cannot pay their rent because of coronavirus over the next 3 months.”
What does this mean for Landlords?
This takes away a recourse a commercial Landlord has for non-payment of rent. However, it is important for tenants to realise that rent is still due and payable; the Government has not announced a rent moratorium.
The period of relief is 3 months from the time the rent is due only, and the rent remains payable.
What can Landlords do?
Commercial landlords should be proactive and be in contact with their tenants to find a way through the next few months. It is open for the parties to agree a way forward which may include:
- deferment of rent (and service charge) payments;
- temporary reduction in the amount of rent payable; or
- a rent free period (this may well be appropriate for businesses which trade from a shop, as an example, where the cash available to pay rent is dependent on trading).
If a tenant is not engaging with the Landlord during this period, having not paid any rent, then there are still remedies available to landlords. The most common that may be used is serving a statutory demand on the tenant, giving a set period of time to pay, effectively formal notice of the debt. Once the set period of time has expired the landlord can issue winding up proceedings (if the tenant is a company). For obvious reasons, this may not be the best option, particularly where the landlord wants to continue letting the property to the same tenant after business returns to a semblance of normality. There may also be a period of time after the “lockdown” period where letting a vacant unit, shop or office premises may be exceedingly difficult !
Essentially, the message is for both landlords and tenants to be pragmatic and discuss sharing the pain involved in missed rent payments if both parties wish to work together in the future.
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