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Government Preventing Aggressive Rent Collection

by Adam Howarth, Editor
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Government Preventing Aggressive Rent Collection

This article “Government Preventing Aggressive Rent Collection” is part of an ongoing series of articles. These articles will keep you up to date with the fast-moving world of Covid-19/coronavirus restriction updates.

The Business Secretary has announced measures to protect UK high street businesses from aggressive rent collection and closures. High street shops and other companies under strain should pay what they can during the coronavirus pandemic.

Information kindly provided by Rachel Cupit, Acting Town-Centre Manager

Voiding of Statutory Demands

There will be a temporary voiding of statutory demands and winding-up petitions for commercial tenants. Additionally, the use of commercial rent arrears recovery will also see changes. These changes build on measures already introduced in the Coronavirus Act. This act asks landlords and investors to work with high street businesses unable to pay their bills during the Covid-19 pandemic.

The majority of landlords and tenants are working well together to reach agreements on debt obligations. Still, some landlords have been putting tenants under undue pressure by using aggressive debt-recovery tactics. To stop these unfair practices, the Government will temporarily ban statutory demands and winding-up orders if a company cannot pay their bills due to the coronavirus.

The measures will be in the Corporate Insolvency and Governance Bill, which the Business Secretary Alok Sharma set out earlier this month. The Government is also laying secondary legislation to provide tenants with more breathing space to pay rent. They will achieve this by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless the tenant owes 90 days of unpaid rent.

This legislation will further safeguard the high street and millions of jobs by helping to protect them from permanent closure. Although the Government will urge landlords to give their tenants the wiggle room needed, they will still ask tenants to pay what rent they can afford in recognition of the strain commercial landlords are feeling too.

Vital to Keep Businesses Afloat

Business Secretary, Alok Sharma, said: “In this exceptional time for the UK, it is vital that we ensure businesses keep afloat. Consequently, they can continue to provide the jobs our economy needs beyond the coronavirus pandemic. Our unprecedented package of support can help commercial landlords. This package includes the Coronavirus Business Interruption Loans Scheme.

“I know that like all businesses and landlords are under pressure. However, I would urge them to show forbearance to their tenants. I am also taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the Covid-19 emergency continues.

The temporary emergency measures will address the pressures landlords are facing while encouraging cooperation in the spirit of fair commercial practice. They also come on top of a substantial package of business support measures. These measures include a moratorium on evictions for commercial tenants for at least three months.”

This article “Government Preventing Aggressive Rent Collection” is part of an ongoing series of articles. These articles will keep you up to date with the fast-moving world of Covid-19/coronavirus restriction updates.

Working With Banks to Address Issues

The Communities Secretary, Robert Jenrick, said: “During this period of significant disruption, we are doing everything we can to ensure that commercial tenants can get back to business from the pandemic. We understand that landlords are facing their own severe pressures and are concerned about their position with lenders. We are working with banks and investors to seek ways to address these issues. Additionally, we wish to guide the whole sector through the pandemic.

The Chief Executive of the British Retail Consortium, Helen Dickinson OBE, said: “Rents are a considerable burden for retailers that are due for payment even where shops are closed. I have raised this problem with Government. Consequently, today’s announcement protects firms who, during these extraordinary times, are unable to meet their rent obligations.

“Thanks to Alok Sharma for his swift action. The plan will give retailers relief and safeguard millions of jobs across the country. We look forward to the finer details, however, it is clear the Government is listening and willing to act.

Giving Hospitality Businesses Breathing Room

The Chief Executive of UK Hospitality, Kate Nicholls, said: “This is a constructive and pragmatic response from the Secretary of State. It will give hospitality businesses some precious breathing space. Many companies in our sector have no revenue whatsoever coming in so paying rent has been out of the question for some.

This extra space will allow businesses to survive and to find a way to work with landlords. If social distancing measures are in place for some time as we now believe they will, we may need to extend this period that businesses can survive.”

These new emergency measures come on top of the Government’s support package for business and workers during the economic emergency. This package includes:

  • The backdating of the Coronavirus Job Retention Scheme. This change means small and large employers will be eligible to apply for a government grant of 80% of workers’ salaries up to £2,500 a month. The revision will be to 1st March and available for at least three months. The first grant will be paid within weeks.
  • A deferral of the next quarter of VAT payments for firms until the end of June. The deferral represents a £30 billion injection into the economy.
  • £330 billion worth of Government-backed and guaranteed loans to support businesses.
  • A business-rates holiday which is worth over £9.5 billion to business across the UK.
  • Small business and grants and grants for the retail, hospitality and leisure.

No Petitions or Winding-Up Orders As A Result of Covid-19

Courts will now review any winding-up petition that claims the company is unable to pay its debts. The law will not permit the presentation of any petitions or winding-up orders due to a company’s inability to pay as the result of Covid-19. This new legislation to protect tenants will be in force until 30th June. There can be an extension in line with the moratorium on commercial lease forfeiture. The legislation will also start earlier to prevent landlords from using CRAR. This depends on there being 90 days or more of unpaid outstanding.

The Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulatory Authority have also issued a joint statement. This statement encourages investors and lenders to understand the issues arising from the Covid-19 pandemic when responding to breaches of covenants.

Emergency government legislation already in place includes a suspension of forfeiture rights. This suspension has prevented the removal of all commercial tenants from their properties until 30th June. The Government has also announced new insolvency measures which will provide further support to businesses impacted by the Covid-19 pandemic.

More information on the Government’s support and guidance for businesses affected by the coronavirus is available here.

This is a particularly stressful time and we need all the support and help we can get. You can find a discussion on guarding mental health during the Covid-19 pandemic by clicking here.

Photo by Nick Fewings on Unsplash.

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