News update: Evictions ban for business owners affected by the Covid-19 pandemic
The moratorium on forfeiture proceedings for commercial leases has been extended until the end of March 2021 to protect businesses from the threat of eviction and to help them rebuild over the winter months.
Restrictions on landlords using Commercial Rent Arrears Recovery (CRARS) have also been extended to try and help businesses pay any outstanding rent owed.
Finally, a review of commercial landlord and tenant legislation will also be launched early next year, to better align the system with the current economic conditions.
More information is due to be published shortly including support to aid negotiations between landlords and tenants. The full details of this announcement can be found on here on .gov.uk
30th September 2020 - Covid-19 legislative amendments
The Government has announced that the moratorium on forfeiture of commercial leases for non-payment of rent will be extended from 30 September to 31 December 2020.
Whilst forfeiture provisions should remain included in all new leases, from a practical perspective, landlords will be unable to exercise such provisions until the end of the moratorium.
9th September 2020 update:
If your business is required to shut due to lockdown restrictions or other local interventions, then you may be able to claim a grant of up to £1,500 for every three weeks it remains closed.
Further details, including the amounts businesses could be entitled to are contained in the full announcement on .gov.uk
4th May 2020 update
On 2nd May 2020, the government announced new funding worth £617m for small businesses in shared spaces such as coworking spaces or market traders. This support comes in the form of £10,000 & £25,000 grants to small businesses that missed out on the coronavirus business rates relief grants announced back in March.
Many small businesses missed out on those grants because they weren’t on their local council’s rates list. The aim of this new fund is to help those small businesses with their fixed property-related costs.
Local authorities are to prioritise businesses in shared spaces mentioned above, as well as those occupying small charity properties, bed and breakfasts that pay council tax instead of business rates and other businesses as they see fit. At their discretion, local authorities may make payments of under £10,000.
To qualify, businesses must have fewer than 50 employees and be able to show that they’ve suffered a significant drop in income as a result of the Covid-19 crisis and resulting restrictions.
Following the statement of the Prime Minister on 23 March, only essential businesses and commercial premises are permitted to remain open for a period of no less than three weeks.
Understandably, landlords and tenants of commercial properties will be nervous about maintaining their mortgage and rent obligations now and beyond this current period of uncertainty.
Government announcement 23rd March 2020
The government has announced that commercial tenants will be protected from eviction if they're unable to pay their rent because of the impacts of coronavirus.
However, that legislation is currently at "Bill" stage, but could become law imminently – in which case, there will be a moratorium on evictions for three months for tenants that have been unable to pay rent as a result of the pandemic. Read more about this here
Advice for landlords and tenants
Concerned landlords and tenants should begin the conversation about what arrangements can be put in place temporarily until the initial crisis is over. Both parties should work together to work out the terms of a payment plan that is agreeable and realistic.
Landlords and tenants alike should ensure they keep up to date with any financial support being offered to business by the government. The government's website keeps an up-to-date summary of those benefits here.
Rent suspension, force majeure and frustration
We recommend that you read the terms of your tenancy agreement and speak to a legal advisor before citing any of the above as a reason to withhold rent, bring an existing lease to an end or enter into a new one.
While it's less common for commercial tenants to be anti-social, damage your property or not pay their rent, it does still happen.
But, there are some very powerful remedies for commercial landlords who have problems with their tenants, not least because the laws that prevent residential landlords from repossessing somebody’s home without a court order do not usually apply to commercial premises (at least not for now).
Commercial rent arrears recovery (CRAR)
There are better remedies for commercial landlords whose tenants don’t pay the rent than there are for their residential counterparts.
The Commercial Rent Arrears Recovery (CRAR) rules mean that without having to go to court, landlords can get a bailiff to sign CRAR notice and can then enter the property to seize the tenant’s goods.
Very often in leases there will be a clause that says if the tenants have not paid their rent for more than 14 or 21 or 28 days, landlords can forfeit the lease. This means they can go in to the property and change the locks because tenants haven't paid their rent.
Forfeiting the tenant’s lease is an aggressive move; there are certain rules about forfeiture that landlords should be careful of and they should always take advice before going ahead and doing it.
Sometimes though, it may be the only remedy because the tenant is nowhere to be found.
For tenants on the receiving end of such an action, they can apply to court for ‘relief from forfeiture’. Meaning if their landlord has changed the locks and the tenant comes back and pays them the rent, any arrears and the landlord's costs of having to do the forfeiture, then the landlord has to let them back in.
Forfeiture is also an option for dealing with other breaches of the terms of the lease, but in those cases - other than non-payment of rent - landlords have to serve a section 146 notice under the Law of Property Act.
This is a notice that says to the tenant that they have done something contrary to the terms of the lease and they must put it right within a reasonable period or the lease will be forfeited.
Most leases will also have a ‘self-help right’ within them. This is something that says the landlord is entitled to go into the premises and have a look around to see if the tenants have kept it in good repair. If they haven’t, the landlord can then serve them a notice saying they must fix this, or repair something else (and give them reasonable time to do so).
If the tenant fails to do so, then, under the self-help right, the landlord (usually) will be able to go back in do the work and charge the costs to the tenant.
The only difficulty then is getting the money back from the tenant, but at least it gives landlords the power to put their premises right.
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