Ban on commercial evictions extended to the end of March 2021

Key points

• Bans on business eviction enforcement against commercial tenant goods (CRAR) and statutory demands extended until the end of March 2021
• Further government guidance to support negotiations between landlords and tenants expected
• Review of commercial landlord and tenant legislation to be launched

Today's announcement by the Government to extend the ban on business evictions until the end of March 2021 is not unexpected.  The press release by the Secretary of State for Housing Rt Hon Robert Jenrick MP says:

"I am extending protections from the threat of eviction for businesses unable to pay their rent until March 2021, taking the length of these measures to one year. This will help them recover from the impact of the pandemic and plan for the future".

Section 82 of the Coronavirus Act 2020 provides that a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, during the relevant period.   The relevant period originally ended on 30th June 2020 and has been extended twice more to 30th September 2020 and then to 31st December 2020.

The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No. 3) Regulations 2020.  S.I. No.1472 have been laid before Parliament today and come into force on 30th December 2020.  These Regulations apply in England and provide that the relevant period is extended to 31st March 2021.  It is believed that this will be the final extension to the current restrictions on the ability of landlords to forfeit commercial leases for unpaid rent which means that unless landlords and tenants can come to an agreement over unpaid rent before 31 March 2021 the landlord's right to forfeit will revive.

The restriction on the right to forfeit commercial leases, was part of a package of measures designed to prevent landlords of commercial premises taking action for unpaid rents.  Today's announcement confirms that the restriction on landlords using Commercial Rent Arrears Recovery (CRAR) to recover unpaid rent will also automatically extend to the end of March 2021, in line with the moratorium’s expiry date.

The Government has also stated that the temporary measure introduced by the Corporate Insolvency and Governance Act 2020 restricting the use of statutory demands and winding-up petitions, which was due to expire on 31 December 2020, will also be extended to the 31 March 2021 and the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020. S.I. No. 1483 have been laid before parliament today and will come into force on 31st December 2020.

Whilst these measures will give struggling tenants further breathing space it does not change the fact that the rent remains payable and in many cases tenants, particularly those in the retail and hospitality sectors will have built up substantial arrears since March of this year.  

Is this therefore simply a case of postponing the inevitable?  When the moratorium ends in March 2021 tenants will still need to address any rent arrears.  This may mean that we will see a spike in tenant insolvencies at this point.  Therefore tenants should not delay but should actively engage with their landlords where they have not already done so.  To date, where tenants are struggling the majority of landlords have shown flexibility and agreed temporary rent concessions or deferments.  This active dialogue between landlords and tenants is supported by the Government who published a voluntary Code of Practice in June 2020 to support landlord and tenant relationships during the pandemic. Indeed we are expecting further supplementary guidance from the Government early next year to support landlords and tenants to continue to work together to agree rent payment options where businesses are struggling.

However it does remain the case that in a minority of cases tenants who can pay their rent are simply choosing not to pay and so taking advantage of the eviction moratorium.  Whilst today's announcement means that that landlords are prevented from exercising certain remedies until 31 March 2021 there remain a number of options which are still open to landlords to recover rent.  These include  debt proceedings, recovery from guarantors and drawing down rent deposits.  Many landlords have already started to use these remedies and there is no doubt that the Government's announcement today will mean that landlords will now be looking at their available options very closely.

Whilst the extension of the moratorium on evictions was expected we were not necessarily expecting the Government to announce a wholesale review of commercial landlord and tenant legislation.  Mr Jenrick has taken the opportunity to state that the Government is proposing to "review the outdated commercial landlord and tenant legislation to address concerns that the current framework does not reflect the current economic conditions".

The aim of this review is to improve the leasing process and enable better collaboration between landlords and tenants.  We do not have any detail as regards the scope of this review but it appears to have a broad scope and will look at forfeiture (which was considered by the Law Commission in 2006) and the security of tenure provisions in Part II of the Landlord & Tenant Act 1954 Part II, different models of rent payment, and the impact of Coronavirus on the market.

The Government's commitment to such a review is welcome provided this is done in a balanced way and drawing on the excellent work that the Law Commission has already done in this area.