Eviction protection extended for businesses that remain closed

The government has on Wednesday (16 June) said it will bring in new rules to ringfence Covid-19 commercial rent arrears and guide tenants and landlords to agree repayment plans.

Measures to protect commercial tenants, including the protection from eviction, will be extended until new rules come into force.

Communities Secretary Robert Jenrick said legislation will be introduced in this session of the parliament  to ringfence outstanding unpaid rent that has built up when a business has had to remain closed during the pandemic. Landlords are expected to make allowances for the ringfenced rent arrears from these specific periods of closure due to the pandemic, and share the financial impact with their tenants.

“We have provided unprecedented support to businesses to help them through the pandemic. However, as we continue to lift restrictions and start to return to business as usual, tenants and landlords should be preparing to pay rent or come to an agreement if they have not done so already,” Jenrick said.

“This special scheme reflects the unprecedented nature of the pandemic and responds to the unique challenges faced by some businesses. It strikes the right balance between protecting landlords while also helping businesses most in need, so they are able to reopen when it is safe to do so.”

The legislation proposes an arbitration process if the tenant and landlord cannot agree on an agreement on how to handle the money owed. The agreement reached after the arbitration will be legally binding on both parties.

“The new arbitration process will be underpinned by law, providing commercial tenants and landlords with peace of mind that Covid-related rent debts will be settled fairly, and with finality. In the meantime, I encourage landlords and tenants to keep working together to reach mutually beneficial agreements,” Business Secretary Kwasi Kwarteng said.

The government added that businesses that are able to pay rent, must do so, and start paying their rent as soon as they are given the green light to open.

The existing measures in place to protect commercial tenants from eviction will be extended to 25 March 2022. The government said this will ensure that the affected businesses have enough time to come to an agreement with their landlord without the threat of eviction.

Statutory demands and winding up petitions will also remain restricted for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.

While the extension applies to all businesses, the new measures that will be introduced by primary legislation will only cover those impacted by closures. Accordingly, the rent debt accumulated before March 2020 and after the date when relevant sector restrictions on trading are lifted, will be actionable by landlords as soon as the tenant protection measures are lifted.

The announcement has been welcomed by the hospitality sector.

“We welcome these measures as they will banish a grim shadow that has hung over hospitality since the Covid crisis began,” Kate Nicholls, chief executive of UKHospitality, said.

“This legislation will form a strong bedrock for negotiated settlements that can help heal the damage that the pandemic has wrought, and we are pleased that the government has listened to our sector, and acted to ease its plight by bringing in an equitable solution where both landlords and tenants share the pain.”