COVID-19 - Further extension to protection for commercial tenants with rent arrears

Unsurprisingly, the government has announced an extension on the moratorium for eviction for commercial rent arrears that have accrued during the COVID-19 pandemic.  More surprising is that the extension will now continue until March 2022.  The announcement follows the call for evidence from tenants, landlords, lenders, and investors.

Rent arrears that have accrued during the pandemic are also now ‘ringfenced’ so that tenants will be expected to pay rent for the periods of time that they were not affected by lockdown.

It appears that the purpose of the announcement is to allow ‘breathing space’ for tenants to trade following lockdown restrictions, whilst allowing landlords and tenants to continue to negotiate settlements in respect of arrears for the period that they were locked down.  The Government announcement states that landlords are expected “to make allowances for the ringfenced rent arrears” and “share the financial impact with their tenants”

The extensions will also allow time for a yet undefined binding arbitration process to be put in place if a negotiated settlement cannot be reached.

Statutory demands and winding up petitions will also remain restricted, but only for a further period of three months, which will then allow landlords alternative means to recover the ringfenced arrears in the event that a settlement cannot be agreed upon. 

The announcement, as it stands, does not affect any ongoing claims by a landlord against tenants for the recovery of COVID-19 impacted rent arrears, or prevent landlords from bringing any new claims. Whether a court will have expected a landlord to have referred the matter to the arbitration scheme in the event that a new claim is brought remains to be seen.

It is clear that the Government is seeking to continue to look to strike the delicate balance between the interest of landlords and tenants in dealing with the pandemic, in the hope those commercial settlements in the interest of both parties can be reached.  It will also be interesting to see in detail how the proposed arbitration process will work in practice.

If you have any questions about this topic or require support for your business, please contact a member of our Property Litigation team.

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