Market Insight

Government announces further assistance for landlords and tenants

June 22, 2020

On Friday 19 June 2020, the government announced a planned extension to the rent protection period for commercial tenants.

This comprised an amendment to the Coronavirus Act, and the Corporate Insolvency and Governance Bill together with the introduction of a new code of practice for landlords and tenants, all of which are designed to help tenants work with their landlords and other partners, on a plan for a sustainable future.

Here’s a summary of some of the key take-aways from the announcement: 

  • Landlords will not be able to forfeit / evict until 30 September 
  • Between now and 30 September landlords will also be prevented from recovering unpaid rent through Commercial Rent Arrears Recovery (CRAR unless debt greater than 189 days)
  • An amendment to the Corporate Insolvency and Governance Bill has been tabled. This will extend the temporary ban on the use of statutory demands and winding-up petitions by landlords until 30 September (where a company cannot pay its bills due to coronavirus)

The Government has also introduced a voluntary code of practice for landlords and tenants, with the aim of assisting those businesses severely impacted by COVID-19 where the pandemic has resulted in a loss of income. 

Cashflow problems have made it difficult for many tenants to pay their landlords, thus placing these tenants in breach of covenant. 

Meanwhile, as a result of their sudden loss of income, landlords now also face breaching their banking covenants, in some cases raising liquidity concerns. 

With the voluntary code, it is hoped to encourage transparency, collaboration and clarity between landlords and tenants, helping issues to become resolved pragmatically, whilst agreeing terms where possible. 

Above all, it is about acting reasonably and responsibly to create a shared recovery plan between landlords and their tenants, which will ultimately benefit both parties. Should agreement not be reached, the code also introduces mediation as a step towards resolution.

This code also encourages tenants who can pay, to do so, and advises those who can’t pay, to pay what they can. 

The code also provides guidance on service charge and clearly states that, as an up front cost, these should be paid in full unless otherwise agreed, guidance on the future management of these costs is also provided.

However, when tenants seek a concession from their landlord, these should be agreed and formally documented for the benefit of both parties. This will remove potential risk and help to avoid breaches of banking covenants or adverse consequences on the ability to operate lease break rights. 

Of course, as with any formal documentation of this type, legal advice should always be sought. 

The code is relevant to all commercial leases held by businesses in any sector which have been impacted by the coronavirus pandemic. It will apply until 24 June 2021 and whilst voluntary, if the code is not followed, it risks potential reputation for landlords and tenants alike. 

For further advice on these changes and what they mean for you as a landlord, or for assistance with your property portfolio, don’t hesitate to get in touch with our expert property asset management team.