What impact will the extension to the commercial tenant protection during the Coronavirus pandemic have on commercial landlords?

Following the Government’s recent announcement that protection for commercial tenants during Coronavirus would be extended, commercial landlords face further challenging times.

Coronavirus protections for commercial tenants

The measures to protect commercial tenants are:

The Taking Control of Goods (Amendment) (Coronavirus) Regulations 2020

This will come into force on 29 September 2020. The aim of the Regulations is to protect tenants of commercial leases with arrears accumulated during the Coronavirus pandemic.

The Regulations increase the minimum amount of net unpaid rent that must be outstanding before CRAR may take place.

The Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No 2) Regulations 2020

These have extended the moratorium period afforded by section 82 Coronavirus Act 2020 to 31 December 2020 in England. These Regulations come into force on 29 September 2020.

For more information on protections for commercial tenants, please see this article.

What are the consequences for commercial landlords?

Many landlords may incur costs via Court proceedings or other routes for recovery where they have tenants still refusing to engage in discussions about their rent arrears.

Some commercial landlords have started to take a different approach.

It has recently been reported that landlords and other creditors of the High street retailer New Look voted in favour of an insolvency process known as a company voluntary arrangement (CVA) which will let New Look reduce rent payments on hundreds of stores including an arrangement where some of its store rents could be linked to turnover. Other landlords may try to follow the same path.

In the context of business lease renewals under part II of the Landlord and Tenant Act 1954, commercial landlords and tenants should be aware that such agreements may have an impact on lease renewals. With lease renewals under Part II of the Landlord and Tenant Act 1954, there is conflicting case-law authority over whether the Courts have jurisdiction to order a turnover rent.

Prior arrangements and evidence in the market place are likely to be considered by the Court on a lease renewal. Landlords who agree turnover rent arrangements with their tenants, however temporary, should be aware this may impact on the rent arrangement for the longer term, if agreement cannot be reached with tenant on renewal.

If you would like to discuss commercial tenancies and protections please get in touch.