Extended protection against eviction – how will it affect businesses and landlords?

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The recent announcement by Community Secretary Robert Jenrick on extending protection for businesses unable to pay rent has been met with mixed reactions. While it will provide some breathing space for retailers and a chance to concentrate on recouping at least some losses, many landlords see it as continued erosion of their own business.

The ban on landlords’ evicting business tenants for payment failure has been in place since April 2020.  It was due to expire at the end of September. Jenrick claimed that a continuation until the end of the year would help protect the high street and save jobs.

Welcome news for retailers

While some tenants had agreed six-month rent holidays with landlords, many had not. Three months of lockdown closure has taken a severe financial toll, putting retailers and smaller businesses at risk of not meeting rental payments.

The extension is aimed at those businesses struggling most with the fallout from the pandemic. It allows time for retailers to try and rebuild sales over the autumn and Christmas period.

Further protection comes in extending the restriction on landlords using Commercial Rents Arrears Recovery to enforce unpaid rent on commercial leases – also until the end of the year.

The advice remains that where businesses are able to pay rent, they should continue to do so – and this is where the rub lies for landlords unhappy with the announcement.

The landlords’ view

Many landlords and their collective bodies such as the British Property Federation are questioning the blanket extension to the moratorium, which they claim is being exploited by big companies who have not seen dramatic losses and can well afford to pay rent. The trade association UK Hospitality estimates hospitality companies owe £760 million in unpaid rent.

Their preference is for the Government to set out an exit strategy, outlining how to transition back to normal market conditions and overcome the challenge of rent arrears.

Can agreement be reached?

Some businesses and landlords have been working together to agree fair rent payment options. In June, the government published a Code of Practice to provide guidance.  As landlords are calling for an adaptation to the ‘one size fits all’ legislation, but small businesses and retailers are still struggling business, a collaborative approach would appear to be the answer. This may deal with some of the long term issues of recovery that will still need answering at the end of the year when the ban is lifted.

High Street chains have had some respite since non-essential stores were allowed to reopen, and the Eat Out to Help Out scheme helped restaurants. This respite will need a different strategy to have a chance of turning into recovery.

Do you need advice?

The situation is in flux and it’s difficult for business and landlords to stay on top of changes and understand how they might be impacted. We’re here to help bring clarity. Call or email Paul Harrington on 01273 324041 or p.harrington@griffithsmith.co.uk