Commercial Tenancy Forfeiture Moratorium Extended – a guide for landlords

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The UK government has announced another extension to the moratorium on forfeiture of commercial tenancies for non-payment of rent. The moratorium will now last until 25 March 2022, having previously been due to end on 30 June 2021.

Under the terms of the commercial forfeiture moratorium, commercial landlords will be unable to evict tenants on the ground that they are in arrears of rent or other sums due under their lease. Landlords are also restricted from seizing tenants’ goods to cover any rent arrears and from petitioning for their insolvency.

Communities Secretary Robert Jenrick has also announced that the government intends to introduce legislation that will ringfence any outstanding unpaid rent that businesses have built up while forced to remain closed during the pandemic. Under the expected terms of this legislation, landlords will be required to make allowances for the ringfenced rent arrears and to share the financial impact with their tenants.

Which tenants are protected by the tenancy forfeiture moratorium?

All commercial tenants other than those who hold leases for six months or less.

The government has stressed that business who are able to pay their rent must do so, providing some reassurance to landlords.

What can landlords do to recover rent arrears under the terms of the tenancy forfeiture moratorium?

In the first instance, it will usually be in a landlord’s best interests to work with the tenant to agree a solution to a rent arrears situation. This might involve the landlord agreeing to write off some of the debt or that the debt can be repaid over a longer period.

It may also be worth looking at other options, such as moving to a turnover rent approach, where the tenant’s rent is based on a percentage of their turnover, rather than being a fixed monthly amount. You can read more about turnover rents in our recent blog on turnover rent leases in non-retail commercial buildings.

It is worth noting that landlords can still take debt recovery action against tenants who are behind on their rent and they can add interest onto the amount outstanding. However, not having the option of forfeiture as a last result can potentially undermine a landlord’s position if tenants simply refuse to pay.

Another option would be to recover any rent arrears from a guarantor (if there is one) or a former tenant (where the lease was assigned to a new tenant who agreed to a direct covenant making them liable for any unpaid rent owed by the replacement tenant).

The government has said that, under the terms of the new legislation it intends to bring forward, landlords and tenants will be required to use binding arbitration to resolve rent arrears due to enforced closures, if an amicable agreement cannot be reached.

It is always worth seeking specialist legal advice on your rent recovery options as there may well be avenues you are not aware of or that you might not have considered.

Speak to our Property Litigation team about a commercial rent dispute

Rent arrears can be very costly for commercial landlords, both in lost income and the time and effort they take to deal with. Trying to navigate these situations during the current moratorium on tenancy forfeiture can be especially frustrating.

If you find yourself dealing with a commercial tenant who is behind on their rent, having the right legal experts in your corner can be crucial. It is often possible to find a workable solution that protects your commercial interests while staying within the rules of the moratorium.

At Longmores, our Property Litigation team have earned a reputation for taking an intelligent, pragmatic approach that helps our clients’ to find positive outcomes to even the most complex disputes swiftly and cost-effectively.

We are ranked by leading client guide the Legal 500 for our Commercial Property and Commercial Litigation expertise. Head of Property Litigation John Wagstaffe has been recommended by the Legal 500 for his property litigation expertise and is a member of the Property Litigation Association .

To discuss a commercial rent dispute or any other commercial property dispute with our highly regarded property litigation solicitors, please get in touch.