The Government announced on 16 June 2021 that the existing restrictions preventing Landlords of commercial premises from evicting their Tenants for non-payment of rent will remain in place for a further nine months, until 25 March 2022. Rent recovery restrictions were also extended.

Section 82 of the Coronavirus Act 2020 introduced a temporary suspension of a Landlord’s right to forfeit business leases for non-payment of rent last year until 30 June 2020. This restriction has been extended a number of times with the current restriction expected to end on 30 June 2021. This has now been extended until 25 March 2022 for all businesses to ensure that those who were unable to open have enough to come to an agreement with the Landlord without the threat of eviction.

Communities Secretary Robert Jenrick announced further that legislation would be introduced to ringfence outstanding unpaid rent that has built up during the pandemic.

The main terms of the Government’s announcement were:

• Current restrictions on forfeiture for non-payment of rent extended until 25 March 2022.
• After 25 March 2022 parties will need to “ringfence” any arrears that have built up to that date and Landlords will need to come to an arrangement to share the financial impact of this unpaid rent with their Tenants.  If agreement cannot be reached a binding arbitration process is to be put in place so that the parties can come to a formal agreement.
• Limitations on a Landlord’s use of commercial rent arrears recovery (CRAR) will remain in place until 25 March 2022 and requires 544 days’ outstanding rent before it can be implemented.
• Current restrictions on the service of statutory demands and winding up petitions are also extended for a further three months until the end of September 2021.

Landlords do however retain rights to recover rent through applications to the Court, withdrawals from rent deposits and claims against any existing Guarantor, as well as taking enforcement action for breaches of covenants other than non-payment of rent. In addition the Government has announced a review of Commercial Landlord and Tenant legislation later this year to include consideration of different models of rent payment and the impact of Coronavirus on the market.

The legislation implementing this further extension has not yet been put forward and will need to be reviewed in detail, as only those rent arrears which accumulated during specific periods of closure after March 2020 during which a business was not permitted to open due to lockdown restrictions will be ringfenced. No forfeiture will be permitted at all in respect of any such “ringfenced” rent arrears whether before or after 25 March 2022.  What Landlords are allowed to do in respect of such arrears is not yet clear. It is also not clear how this applies to office premises where prohibitions on opening were less strict.

Although this long-term extension to the restrictions on enforcement and rent recovery does give Tenants breathing space and parties the time to come to an agreement in respect of how such arrears are to be dealt with they are unlikely to welcomed by Landlords. Recent case law has however made it clear that the Courts will not look favourably on businesses who have made use of this restriction in circumstances where they have been able to pay rent.

The Government’s full press release can be read here.

If you need any further assistance on forfeiture and rent recovery restrictions, please contact our commercial property team.