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Coronavirus (COVID-19): What do the extended government protections mean for businesses?

23/06/2020

On Friday 19 June, the government announced an extension to its program of statutory protection for commercial tenants, which was designed to protect them during the Covid-19 pandemic.  What do the extended government protections mean for businesses?

Chief among them is the absolute prohibition on forfeiture of commercial leases by landlords for rent arrears, which was initially set to expire on 30 June but will now, the government have announced, continue until the end of September.

What does this mean for businesses?

Friday’s announcement is likely to be a game-changer for high street businesses gearing up to reopen. Whilst a general spirit of fairness and tolerance seems to have been embraced by most during these unprecedented times, there remains a minority of landlords who have less patience, and once the moratorium on forfeiture expires any tenant in arrears of any rent will be immediately at risk of abruptly losing their premises.

The government has recognised that imploring landlords to be reasonable, but permitting them to forfeit their tenants’ lease if they don’t want to be, does not give commercial tenants the peace of mind they need to reopen with confidence. At a time when costs to reopen are going to be high – with many businesses investing in screens or other equipment to ensure maximum safety – and income may be low – given that consumers can only enter at reduced capacity – the payment of another quarter’s rent may seem unachievable for many.

What does this mean for landlords?

The news is likely to frustrate many landlords, and none more so than those of defaulting tenants whose businesses have been unaffected by the pandemic. The protection legislation does not discriminate between tenants who have had to cease trading and those whose income have been unaffected, and its therefore ripe for abuse by tenants who wish to exploit the statutory protection even though they may not need it.

Unfortunately, there is no quick-fix for landlords in those circumstances. The saving grace which landlords (and tenants, for that matter) should bare in mind is that this legislation does not grant tenants a waiver of their rent liability, and it must all be paid eventually – usually with interest on top.

What does this mean for the consumer?

Crucially, the extension of this protection means that we are unlikely to see much changed in our high streets for the next few months at least, which is good news all round. A thriving high street protects jobs, maintains footfall and encourages healthy competition for the consumers, which is why this legislation has been seen as so key.

The longer term effects of these announcements will remain to be seen, but with the June quarter now stacking on top of the rent for the March quarter, tenants who take advantage of this moratorium are likely to playing catch up for some time.

*The information set out in this article is correct at the date of publication (23 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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