Government extends commercial eviction ban



The government has extended the ban on commercial evictions by nine months until March 2022.

Some retailers and other commercial tenants are struggling to pay their landlords amid the three UK lockdowns.

The ban was due to end on June 30, but Steve Barclay, chief secretary to the Treasury, told the House of Commons that the government would extend it until March 25 2022.

The government also plans to introduce a binding arbitration protest for tenants and landlords who haven’t reached an agreement on repayment programs.

Barclay said: “In recognition of the importance of jobs in the many affected businesses at the heart of local communities, we launched a call for evidence in April on further actions to take to resolve those debts.

“As a result of that call for evidence, the Government now plans to introduce legislation to support the orderly resolution of these debts that have resulted from Covid-19 business closures.

“We will introduce legislation in this parliamentary session to establish a backstop so that where commercial negotiations between tenants and landlords are not successful, tenants and landlords go into binding arbitration.

“Until that legislation is on the statute book existing measures will remain in place, including extending the current moratorium to protect commercial tenants from eviction to March 25 2022.”

Barclay went on to say that tenants should resume paying rent in accordance with their leases if they are open and trading.

Priya Sejpal, associate solicitor and property litigation specialist at law firm BLM, said: “This extension isn’t entirely unsurprising, given that there will still be many businesses who could struggle to pay rent whilst restrictions are in place, particularly those in the most affected sectors like nightclubs, hospitality or travel.

“However, whilst it’s some relief for tenants now, they could still be facing a barrage of legal action once the moratorium ends. It’ll also be frustrating news for landlords, given this is the fifth extension the government has imposed. Many landlords themselves will be struggling due to non-payment, and can’t be expected to bear the brunt of this policy forever.

“More than ever before, landlords and tenants need to negotiate with each other as per the Code of Practice for the commercial property sector, but of course this is a voluntary code and given the inherent frustrations both parties will be feeling, some may not be feeling the spirit of it.

“Many have called for new measures beyond a moratorium, so the mandatory binding arbitration period announced today is welcome news.

“However, will this be enough? A phased withdrawal where those in minor arrears can access the moratorium, whilst those who are in significant rental arrears could face eviction, may be a better way to strike a fair balance.

“It’s an idea that is not too dissimilar to the residential eviction side of things, with the rules applying differently depending on the landlord’s reason for giving notice and, where the reason is rent arrears, the level of the arrears.

“It’s something the government will need to consider very carefully in the coming months. Otherwise, we’re in a position where we could still expect a flood of insolvencies and forfeiture claims, placing further financial burden on both landlords and tenants.”

The government extended its coronavirus restrictions on businesses by a month on Monday, amid rising cases.

Melanie Leech, chief executive of the British Property Federation, said: “The government has failed to recognise that commercial property owners are essential to the health of our town centres – to creating economic growth, jobs and opportunity.

“The majority of property owners have already reached agreement with their tenants on rent, and millions of pounds have been provided to the most vulnerable tenants in the sectors most impacted by Covid-19. That support will continue in light of the delay in the recovery roadmap for those businesses that need it.

“The property industry itself proposed this idea of ringfencing rent arrears for the most vulnerable tenants hardest hit by Covid-19 – to provide more time for these tenants and their property owners to reach agreement, where they have not already done so, on rent debt built up during the pandemic.

“Whilst it is positive that the government has taken this forward, there is no justification for delay. Most businesses are now open and trading and the legislation required to focus protection on the most vulnerable and to create a clear exit path to deal with rent arrears should have been put in place for the end of this month when the moratoriums are due to expire.”

Andrew Teacher, former spokesman for the BPF and founder at Blackstock Consulting, a policy advisory firm and executive committee member at Urban Land Institute, said: “The issue here is less the moratorium on evictions and more the fact that many profitable firms are not paying their rent. Today’s extension will not make the financial pain for businesses disappear – it simply kicks the can down the road.

“Any sane landlord wouldn’t want to kick out a tenant with a functional business and risk the pain of paying empty rates on a vacant building. But the government cannot continue to put its fingers in its ears over the real damage this does to the property industry and the knock-on effect ongoing uncertainty poses to banks and institutions.

“The problem for landlords is that, politically, extending the eviction ban was an easy decision. Retail and hospitality has been battered by lockdowns, and there are no votes to be lost in bashing real estate firms who often choose not to engage with the world around them or properly explain how things work.

“The upshot is a total lack of understanding of how most property is financed using pension fund cash and with it, a lack of sympathy in situations like this.

“A dozen years back, we were fighting against empty rates and the onset of CVAs. Nothing much has changed. What needs to happen now is for ministers to clearly define who should benefit from the moratorium and for it make clear that profitable firms need to pay up. Otherwise, it’s simply transferring value unfairly from one set of shareholders to another, while making a mockery of Britain’s reputation for legal certainty.”

 

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