James Letchford discusses the extension of certain temporary protections for commercial tenants

Further protections for commercial tenants

The snappily titled the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No 2) Regulations 2021 (SI 2021/718) came into force on 22 June 2021 and extends certain temporary protections for commercial tenants.

These new regulations provide a further extension to restrict the issue of statutory demands and petitions for winding up companies until 30 September 2021 rather than 30 June 2021.

This follows hot on the heels of the Taking Control of Goods (Amendment) (Coronavirus) Regulations 2021 (SI 2021/300) which came into force on 25 March 2021 and increases the minimum amount of net unpaid rent that must be outstanding before the landlord can exercise rights of commercial rent arrears recovery (‘CRAR’) against tenants. Whilst this ended on 30 June 2021, it is expected to be extended until 25 March 2022 where the minimum net unpaid rent that must be outstanding is likely to remain at 554 days.

There are also express protections for business tenants that limit the landlord’s ability to forfeit the lease before 30 June 2021 due to non-payment of rent. This date is also expected to be extended.

The recent changes form part of the wider proposals announced by the government on 16 June 2021 to protect those businesses that have had to remain closed during the pandemic and are unable to pay rent on commercial property. More protections are to follow including the proposed ring fencing of rent arrears for specific periods of closure with the intention that the landlord and the tenant will agree how to deal with those arrears. This might be by way of waiving some of the total amount due or agreeing a longer term repayment plan. If no informal arrangement can be made then a binding agreement will be imposed following an arbitration process.

This does not mean that landlords are giving away Money for Nothing. Where tenants can pay rent, they should pay rent and this links to when restrictions around their business changed.

Sensible landlords and tenants will already have had discussions dealing with arrears (and indeed agreed formal lease variations and waivers). Having further protections and a formal mechanism to reach agreement can only be good news for landlords and tenants alike.

If you are a landlord or tenant and need advice, or if you have questions about any other commercial property issues, please contact James Letchford on 020 7412 0050 or james.letchford@hunterslaw.com.