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Coronavirus (COVID-19): Government extends protections for business tenants

22/06/2020

With 30 June 2020 (the end date for the government’s moratorium on forfeiture of commercial leases) approaching ever nearer, tenants, landlords and lawyers alike have been waiting with bated to breath to find out whether the government will exercise its discretion to extend that protected period.

Of course, the financial position the majority of commercial tenants find themselves in has not differed much from March this year, and those who were unable to pay the March quarter are unlikely to already be in a position to pay those arrears and cover the June quarter, which traditionally falls due on 24 June 2020. It will comes as no surprise to many, therefore, that last Friday (19th June) the government announced that its prohibition on commercial forfeiture will not end at the close of the month and will instead extend to 30 September 2020.

In a world where retail and industry has already begun to reopen, leisure and hospitality being not far behind, this extension may seem a long one, but if there is anything this pandemic has taught us so far it is that you cannot predict the unpredictable. It is also worth noting that the moratorium is designed to protect tenants so that they come out the other side of these difficult times with their business intact, and the moratorium therefore not only needs to allow them to reopen but to be able to then cover the March and June quarters already caught by the legislation in time to pay the September quarter.

Commercial Rent Arrears Recovery (“CRAR”)

Forfeiture is not the only landlord remedy which has been caught by the new announcement. Commercial Rent Arrears Recovery (CRAR) which allows a landlord to send enforcement officers into a tenants’ premises and levy against goods found there has also been affected. The initial legislation restricted CRAR to any landlord whose tenant was in at least 90 days’ arrears (the usual limit being 7 days), and this has been extended to 189 days. The restrictions on statutory demands and winding up petitions have also been extended.

Code of Practice

In addition, the government has published a voluntary Code of Practice which aims to assist landlords and tenants in their dealings with each other during these difficult times. Tenants are urged to continue to pay rent if they are able, and if they are not able to then the Code requires them to be open and honest about the reasons they require forbearance.

The news will come as a blow to some landlords, although many are coming to terms with the ever-shifting financial landscape we find ourselves in and understand the effects of this pandemic is being felt throughout the chain. If you require advice on any of the issues covered here, or others, please get in contact and we would be happy to assist.

How will the government extensions impact commercial landlords and business tenants?

We delve in to to how the latest extension will impact commercial landlords, business tenants and consumers in our latest post “What do the extended government protections mean for businesses?

*The information set out in this article is correct at the date of publication (22 June, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected. Visit our Coronavirus (COVID-19) Hub for more Leading Insights.

Contact us

If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice on property dispute matters, contact Laura Offer on 01202 294 566 or email LauraOffer@steeleraymond.co.uk. Alternatively, contact a member of our Commercial Property team in Bournemouth.

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