COVID-19: Extended protections for business tenants

Published 22 June 2020

The impact of COVID-19 has severely affected both landlords and tenants. The Government set out a range of measures to assist tenants in March and has now extended their effect in advance of the upcoming June quarter date. The key amendments to the measures are as follows:

• An extension to the time period for suspension of the forfeiture of evictions from 30 June to 30 September, meaning no action can be taken to terminate a lease for non-payment of rent and other sums due under a lease until 30 September at the earliest.
• The temporary ban on the use of statutory demands and winding-up petitions where a company cannot pay its bills due to coronavirus is to be extended to 30 September.
• Landlords are prevented from using Commercial Rent Arrears Recovery unless they are owed 189 days of unpaid rent. The time period for which this measure is in force will be extended from 30 June to 30 September.

Following consultation with business, property and retail bodies, the Government has also issued a Code of Practice for commercial property relationships during the pandemic. The Code is intended to promote good practice amongst landlord and tenant relationships, facilitate discussions and encourage both parties to work collaboratively to resolve issues pragmatically and agree terms where possible. Key terms of the Code include:

• It advocates that if a party can pay then it should pay. Since landlords have to make out of pocket payments for service charge and insurance, these sums should be paid by tenants as a priority;
• Landlords should seek to reduce service costs where practicable and consistent with providing best value;
• It seeks to encourage both parties to be more transparent, with tenants being prepared to provide financial information about their business when seeking concessions from their landlords. Landlords should provide concessions where they reasonably can, taking into account their own duties and financial commitments;
• It sets out a number of suggested examples of forms of concession agreement; and
• It will apply until 24 June 2021.

Compliance with the Code is voluntary, but adherence to the principles and approach set out in the Code is expected. It will be interesting to see if the Code leads to greater transparency and collaboration, but it remains to be seen if it will be sufficient comfort for landlords given that compliance is voluntary, whereas tenants benefit from protections set out in formal legislation.