Solicitor Asma Muneer, in Blandy & Blandy’s dispute resolution team, discusses the limitations affecting commercial landlords' ability to recover outstanding rents and what might happen next.
Since the Covid-19 pandemic struck, in the first quarter of 2020, significant limitations have been placed on commercial landlords' ability to recover outstanding rents. This has put many landlords in a difficult situation as rent arrears continue to accrue and the recovery options remain restricted more than a year on.
The Code of Practice, published by the Government on 19 June 2020, is a voluntary code to assist landlords and tenants. The main principle of the code is "transparency and collaboration", and the Government's aim is to encourage landlords and tenants to act "reasonably and responsibly" in light of the pandemic. Where commercial tenants’ ability to pay rent has been severely affected, many landlords and tenants have had to open a dialogue to try to agree the best solution for both parties in the current circumstances and to maintain their business relationships going forward.
The current restrictions which remain in place and are affecting landlords are:
The various enforcement restrictions are currently due to expire at the end of June 2021, by which time another quarter day will have passed and another rent payment will have fallen due.
In the meantime, landlords in England and Wales can still recover rent and other sums due to them despite the above Coronavirus legislation. Depending on the specific circumstances, remaining options for landlords include the following, but not limited to:
There is a possibility that the moratoriums may be extended again. The Government announced a consultation in April 2021 on what to do about commercial rent arrears when the restrictions end. The Government has proposed six possible options, some of which include allowing forfeitures to proceed, encouraging mediation, or binding and non-binding adjudication. The consultation is now closed and further announcements are anticipated before the end of June 2021.
As it is possible that some or all of the restrictions may continue or be replaced with alternatives, it would be worthwhile for landlords and tenants to consider their positions and look to reach an agreement voluntarily between themselves before further announcements are made.