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Advice

Extension of protection for commercial tenants and new ‘ring-fencing’ procedure

The Government has announced its intention to extend existing restrictions.

On Wednesday 16 June 2021 the Government announced an extension to the current protections for commercial tenants together with an intention to introduce new legislation to ‘ring-fence’ accrued business rent arears and to subject them to binding arbitration.

Extension to current restrictions

The Government has announced its intention to extend existing restrictions on:

  • Statutory demands and winding up petitions (to 30 September 2021);
  • Rent-related forfeiture of business tenancies (to 25 March 2022); and
  • Commercial Rent Arrears Recovery (to 25 March 2022), though the total number of days’ outstanding rent will remain at 554 days.

Additional legislation to be enacted to govern an arbitral process between landlord and tenant

This legislation will apply to those businesses that have been impacted by pandemic closures and will “ring-fence” any unpaid rent that has accrued as a result of enforced business closure during the pandemic.

It is suggested that this will assist tenants and landlords to find agreement as to how business rent arrears should be dealt with. If agreement cannot be made, the legislation will “ensure a binding arbitration process will be put in place so that both parties can come to a formal agreement”.

Reiterating that landlords shall be protected, the Government has stated that businesses who are able to pay rent must do so and that tenants should pay rent as soon as restrictions allow them to open. At this stage, it would appear that there will be no exemptions for reduced capacity openings or tenants who chose to remain closed due to reduced footfall or customer demand.

Robert Jenrick (Communities Secretary) stated:

“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”.

Call for evidence

We also await the Government’s response to the recent call for evidence on commercial tenancies, which is set to be published in due course.

Contact our expert property litigation solicitors who can provide further specialist advice.

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