The announcement on 4 January 2021 of the new lockdown in England was a further blow to business. With many tenants already struggling to pay the rent, here is a useful reminder for tenants of the current legislation.

On 9 December 2020, the Communities Secretary, Rt Hon Robert Jenrick MP, announced that the temporary ban on the use of forfeiture for non-payment of rent, the use of Commercial Rent Arrears Recovery (CRAR) and the issue of statutory demands and winding up petitions where a company’s inability to pay its bills is due to COVID-19, will be extended until the end of March 2021.

Whilst this is good news for corporate tenants in these difficult times, those who can pay should pay because:

  1. Landlords still have other remedies available to them for breach of covenant as set out in our previous blogs. Please see “Commercial Landlords and COVID-19”  and “Extension of measures to protect commercial tenants”  for further details.
  2. The liability to pay rent is not suspended and interest will accrue on late payments under most commercial leases.

A corporate tenant which is struggling to pay its rent should consider to what extent it can meet its payment liabilities under the lease and approach its landlord with its payment proposals. This may include deferring whole or, more likely, part of the rent until later down the line. Any agreement should be formally documented to ensure it is enforceable between the parties.

This should provide an element of comfort and certainty for tenants who are able to reach agreement with their landlords. It will prevent a landlord taking any action for non-payment of rent now whilst the COVID-19 protections exist but also, most importantly, once the protections finally lapse. The Government has stated that the protections will lapse at the end of March 2021 and no further extensions will be granted. However given the new lockdown that has been imposed it would not be surprising if the protection for business tenants is further extended beyond 31 March 2021.

The Government has always maintained that a landlord and tenant should work together to find a solution that enables them both to remain solvent. In line with this, the Government produced a voluntary Code of Practice in June 2020 with suggestions as to how to approach the current situation. The Code can be found here: https://www.gov.uk/government/publications/code-of-practice-for-the-commercial-property-sector/code-of-practice-for-commercial-property-relationships-during-the-covid-19-pandemic.

Further guidance to try and assist negotiations between landlords and tenants will be published early this year. Mr Jenrick has also announced that there will be a review of commercial landlord and tenant legislation which is viewed as outdated, particularly in the current climate.

We are experienced in drafting supplemental agreements between landlords and tenants and in negotiating with landlords’ representatives.  If you require guidance in this respect, please contact David Whitaker on 0113 280 2118 or Julian Rowden on 0114 228 3280 to find out how they can assist you with this. We also have a dedicated Covid-19 page dealing with changes to other areas of the law.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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