Moratorium on commercial evictions extended to 31 March 2021, but what is the government’s long game

Moratorium on commercial evictions extended to 31 March 2021, but what is the government’s long game

This article was published on: 9th December 2020

Commercial tenants will breathe a sigh of relief following the latest extension of the ban on evicting commercial tenants for rent arrears, until the end of March 2021, announced by Communities Secretary, Robert Jenrick today.  Restrictions on seizing tenant’s assets using Commercial Rent Arrears Recovery and the use of winding up petitions have also been extended.

These restrictions provide further, no doubt welcome, relief for struggling business, but many landlords are now facing a year without any rental income and no sign of an end.  This is not the first such extension and it will not be the last.

It is not popular politics for the government to stick up for landlords, but the reality is that commercial landlords are not all wealthy off-shore companies.  They have finance to pay on their investment(s) and other overheads such as employees, building insurance and maintenance.  Some landlords are individuals.  Some have and will go out of business.  Many properties are owned by pension funds using the money that all of us pay into our pensions every month.  Some business tenants are also bigger and more powerful than their landlords and are taking unfair advantage of the moratorium.

This is a ticking timebomb and at some point during 2021 the government is going to have to release these restrictions.  Unless a scheme to gradually decompress the national rent debt is devised and implemented, this will lead to a tsunami of evictions and insolvencies beyond anything in history. Whilst business tenants will be protected from eviction, for now, rent arrears will continue to increase to unprecedented levels. While the government has stated that tenants should pay any rent they can, and have introduced a Code of Practice, this is rarely followed and often abused.

Jenrick has also announced a review of “outdated commercial landlord and tenant legislation”  No indication has been given as to which particular legal principles the government has set its sights on.  However, it would not surprise me if they consider banning peaceable re-entry, requiring landlords to apply for a court order to evict (as in the case of residential property) and if they consider banning upward rent reviews and imposing turnover rent in certain circumstances.  However, all of these changes would be highly prejudicial to landlords and would have adverse economic consequences for both landlords and property investments made by pension funds, in which we all have a vested interest.  This is an indication though that the government intends to create a new more tenant friendly framework to kick in when the rolling restrictions are finally released.  Reviewing and consulting interested parties and changing decades of landlord and tenant legislation by end of March however is completely unrealistic.  We will probably be looking at late 2021.

An alternative approach which could be implemented much more quickly and without further prejudicing property owners and investors would be a Danish-style furlough scheme, under which, tenants in the most vulnerable sectors, could be granted a temporary rent reduction and the reduced rent is part paid by the tenant and part paid by the government.

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