How has Covid-19 affected commercial landlords?
PUBLISHED: 11:04 29 May 2020 | UPDATED: 14:01 29 May 2020
The effects of Covid-19 on the high street have been catastrophic for the leisure and retail sectors, says Spire Solicitors’ Protima Sikdar-Wood.
Even with innovative solutions for many through ecommerce, social media awareness and community spirit, we’re seeing a large amount of enquiries in respect to the unknown, particularly from the loss of income and ultimately, inability to meet rental obligations.
The important question now is how can landlords protect themselves, as well as assist their commercial tenants during lockdown and the gradual reopening of the UK society?
The Coronavirus Act 2020
Under the Coronavirus Act 2020, passed on 25 March 2020, section 82 highlights that no business can be forced out of its premises if it misses a rent or lease payment obligation. This also includes service charges and insurance rent prior to 30 June 2020. Under the Act, it also gives the Government power to make future extensions beyond 30 June 2020.
At the beginning of the lockdown, some aggressive tactics from a few landlords had been publicised, as a result of which, on 23 April 2020, the Government published further measures including a temporary ban on the use of statutory demands and winding up orders for non-payment of rent. This will also apply until 30 June 2020, with power to extend beyond 30 June 2020.
Can landlords use alternative methods to claw back rent arrears from commercial tenants?
Normally landlords would have been able to proceed under Commercial Arrears Rent Recovery (CRAR) rules. They could for example instruct an agent to take control of a tenant’s goods to sell in order to cover any arrears, or debt. Under the regulations announced on 23 April landlords will be prevented from using CRAR unless they are owed at least 90 days of unpaid rent.
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What can the landlord do?
Under the Coronavirus Act 2020, the landlord has limited options; however, the landlord may be able to draw down on a rent deposit. This could be beneficial during Coronavirus as, under the terms, the tenant is generally obliged to top up a deposit following withdrawal.
If no rent deposit exists, even though a landlord’s right of direct action has been temporarily removed, a landlord can still issue court proceedings for arrears in non-payment of rent. It’s important to note even though a claim for debt can be brought, it is unlikely that any such claim would be concluded before the end of June.
Taking business day-by-day
These recently implemented changes are temporary emergency measures in place until the end of June. Landlords will be reassured to learn that the changes do not in themselves alter a tenant’s liability for payment of rent. Rather, they only alter the remedies available to the landlord for non-payment of rent. A landlord’s remedy in respect of any other breach by commercial tenants remains unaltered.
Faced with a tenant in financial difficulties, who is genuinely unable to meet their rent obligations, there are a number of sensible and reasonably straightforward steps that a landlord can and quite possibly should take now to place themselves in the best possible position in the months ahead.
Contact Spire Solicitors LLP on 01603 677077 for further information on commercial property law or for other legal needs.
This column is sponsored by Spire Solicitors.
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