Temporary new measures introduced to protect the UK high street from aggressive rent collection and closure
The Government has pledged an unprecedented package of support for retail businesses, which are affected by coronavirus. These temporary new measures are aimed at safeguarding the UK high street businesses and their employees and include ways of protecting retailers from aggressive rent collection tactics as well as giving extra protection with bans on evictions if rent payments are missed. In many situations landlords and tenants are working together to reach agreements on debt obligations but a small minority are not and in the latest article from the Retail Mutual, we look in more detail at the measures that the Government has put in place to protect high-street businesses from eviction.
The Business Secretary, Alok Sharma, has pledged that retailers who are feeling the strain will be asked to pay what they can towards their rent and will be protected from aggressive debt recovery tactics from landlords. These practices are deemed unfair and statutory demands made between 1 March and 30 June 2020 will be temporarily banned, as will winding-up petitions presented from 27 April to 30 June 2020, when a company cannot pay its bills due to coronavirus. These measures will be included in the Corporate Insolvency and Governance Bill. Secondary legislation will also prevent landlords from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days or more of unpaid rent.
The temporary ban on the eviction of high street businesses has now been extended until the autumn. Previously, as described above the ban had been until 30 June and this has now been moved until the end of September. With the high streets starting to come to life again, the new measures are designed for clarity and reassurance for both landlords and their tenants including retail business owners, so that finances can be stabilised and businesses can bounce back.
Code of practice established for commercial property relationships during the COVID-19 pandemic
The government has also established a code of practice backed by a number of bodies including the British Retail Consortium and UKHospitality to help negotiations between tenants and landlords. This is designed to help commercial landlords and tenants map out plans for economic recovery during the coronavirus pandemic. It will provide clarity when rental payments are being discussed and will encourage best practices to support every part of the chain.
Retail business owners should still pay their rents if they can
Tenants are still being encouraged to pay their rent in full if at all possible or to pay what they can afford with landlords being encouraged to support businesses if they are in a position to do so. Transparency is advocated in discussions between landlords and their tenants with landlords being asked to behave responsibly and to recognise the serious impact coronavirus has had on the finances of retail business owners.
A ban on evictions for commercial tenants who miss rent payments
The emergency legislation also includes a suspension of forfeiture rights, preventing all commercial tenants from being removed from their properties until 30 June and now extended to 30 September.
Forfeiture means that a lease can be terminated with the property returned to the freeholder and could arise if the terms of the lease are breached. Under normal circumstances, the lease will automatically terminate upon the act of forfeiture. However, the Government, due to the outbreak of coronavirus, has put emergency legislation (Coronavirus Act 2020) in place to provide a transitory period of partial assistance to commercial tenants.
The measures are aimed at supporting ongoing communications between landlords and tenants about voluntary arrangements. In many cases tenants are being offered rent deferrals or holidays.
New legislation to stop petitions being presented or winding-up orders
If a retailer receives a winding-up petition claiming that they are unable to pay their debts, it must be first reviewed by the court to determine why this is the case. As an additional proviso, the Coronavirus Act 2020 (CA20) will prevent petitions being presented, or winding-up orders being made, where the company’s inability to pay is the result of COVID-19. This new legislation was originally in force until 30 June, and has now been moved to 30 September in line with the moratorium on commercial lease forfeiture.
CA20 Section 82 prevents eviction due to non-payment of rent
Section 82 of the CA20 places a ‘moratorium’ on the ability of landlords to forfeit a commercial lease for non-payment of rent until 30 June 2020 as defined in Section 82 CA20 as the ‘relevant period’. This period is subject to extension due to the uncertainty of the economy at this present time and has now been extended to 30 September. It is important to note that this legislation only applies on failure to pay rent at the expiry of the payment period as provided in the lease and not in any other circumstances. The provisions of CA20 do not protect tenants, if they are in breach of any other covenants, with Section 82 only preventing eviction if the only breach is non-payment of rent.
What does it mean for the UK high street?
Keeping retail businesses afloat in exceptional times
With the legislation due initially to be in place to protect tenants until 30 June, and now extended to 30 September, although this may be extended, these measures will give retailers welcome relief. It is vital that retailers are in the best position possible to get their businesses operational again once restrictions begin to ease. By helping retailers stay afloat, jobs will be retained that the economy will need beyond the coronavirus pandemic.
Chief Executive of the British Retail Consortium, Helen Dickinson OBE:
“Rents are a huge burden for retailers that must be paid even where shops are closed.”
“We thank Alok Sharma for his swift action, which will give retailers some vital relief and help safeguard millions of jobs all across the country. We look forward to the finer details, however it is clear government is listening and willing to act.”
What can The Retail Mutual do for your business?
The Retail Mutual understands that this is a difficult and frustrating time for retail business owners and recognises the pressure they may be under to pay their rents. The Government has acted swiftly to help tenants, as many retail businesses have had to close to prevent the spread of COVID-19.
We are receiving a high volume of calls and enquiries regarding coronavirus. We are continuing to answer all enquiries as quickly as possible and we appreciate your patience and understanding at this time. To help answer some of the recurring questions, we have created a dedicated resource hub. This includes FAQs, useful Government information and links, and a range of informative articles to help you navigate your way through the pandemic.