Time's Up for Commercial Tenants
25 March 2022
The High Street Task Force report, “Delivering a 21st Century High Street” has just been published and the vision outlined in it will require everyone to work together, in partnership to overcome the challenges and issues that our high streets face.
Throughout the pandemic retailers have faced significant difficulties, not least how to meet their commercial rent obligations when faced with periods of lockdown and lack of footfall. Many commercial landlords and tenants have worked collaboratively to find a way through this period and the Coronavirus Act 2020 afforded commercial tenants protection from forfeiture for non-payment of rent and separately the Corporate Insolvency and Governance Act 2020 restricted commercial tenants from being made insolvent by their landlord for any monies due from them under their lease.
However, one of the key Covid-19 restrictions which affected business life here is due to be lifted, as commercial tenants in Northern Ireland will lose protection from eviction on the 25th March 2022 after the emergency pandemic measures expire. This deadline has of course been extended several times before, however unlike previously the current position with the NI Assembly makes this likelihood far from certain.
A code of practice for commercial property relationships was published by the Government during the pandemic urging landlords and tenants to work together on resolving unpaid rent whilst these restrictions were in place. Many landlords and tenants have done so in the form of deferred rent agreements, rent concessions and lease re-gears. Whilst this will have gone some way to alleviate the issue, there are still many cases where no agreement has been found.
Commercial tenants who have no means to pay the rent which built up over lockdown are now facing the potential of receiving a demand for the whole amount to be paid by the end of Easter. To counteract this, the Commercial Rent (Coronavirus) Bill is being introduced in England and Wales at the end of this month creating a mandatory arbitration scheme to deal with rent arrears that have been accrued by businesses that were forced to close by the Government during the pandemic. In essence, "ring-fencing" these specific arrears and forcing landlords and tenants to arbitrate rather than going through normal recovery processes.
Previous experience with pandemic induced legislation in England and Wales has been that Northern Ireland follows suit with its own mirroring legislation usually a few weeks after. However, the recent developments with the NI assembly has thrown this probability into question. As the introduction of this legislation would be key for tenants in addressing their rent arrears situation, professional advice should be taken on what effect this will have, particularly if the Finance Minister or the NI assembly are not able to extend the current restrictions on forfeiture and commercial rent recovery beyond 25th March.
From next month, in England and Wales the proposed arbitration scheme for these ring-fenced rent arrears will be open for a limited time frame of six months. After that, landlords can avail of the usual remedies of exercising their right to forfeit and re-take premises from tenants or enforcing debts through the courts.
There is no doubt that more needs to be done to soften the impending financial reality that many businesses will now face. The extension of the business rates holiday will certainly assist. It seems that businesses here shall very soon be reliant on the good will of their landlords and quite possibly the Courts to continue their recovery out of the pandemic.
It is likely to be a year of negotiations and already, our team’s experience in dealing with commercial landlord and tenant issues has been in considerable demand. If you haven’t already sought advice in relation to commercial rental arrears or your lease terms, then now is the time to act.
Contact Julie Galbraith, Partner, in DWF’s Belfast Office for further advice or information firstname.lastname@example.org