New legislation offers breathing space for commercial property tenants
The government has announced that it is extending the moratorium to protect commercial property tenants from eviction, for non-payment of rent, until 25th March 2022. The rules were due to come to an end on 30th June 2021 so the extension will come as a welcome relief to commercial tenants still dealing with the closure of their premises.
In addition, the government intends to introduce new legislation to ringfence rent arrears that have built up during COVID related premises closures.
Of course, there are two sides to every story and the extension and ringfencing may not be as welcomed by commercial property landlords struggling to obtain rent from their tenants.
By now, most commercial landlords and tenants will have started a meaningful dialogue to reach an agreement for a rent reduction or extended payment period. But if you are not one of those, then it is time to start talking as the new legislation intends to introduce a framework to settle disputes between landlords and tenants. It will introduce a legally binding arbitration process, meaning that both parties have to abide by the ruling of that arbitration process.
Of course, the devil is in the detail, and the detail of the new legislation is as yet unknown. Addressing the Commons, Treasury Secretary Stephen Barclay said that the new rules were intended to “support those businesses that are most in need”. This could infer that the new rules will only apply to those businesses that remain closed as a result of the pandemic. He went on to say that,
“…tenants should start to pay rent again in accordance with the terms of their lease or as otherwise agreed with the landlord as soon as restrictions are removed on their sector.”
In the property world we are familiar with the phrase ‘location, location, location’. In the case of commercial tenants and landlords, the paramount phrase needs to be ‘communication, communication, communication’. Whether a commercial landlord or tenant, start the dialogue today.
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