The government has announced that business owners affected by the pandemic will be protected from eviction until the end of March 2021 by an extension of its moratorium on rent.
In its announcement this week the government said the “majority of commercial landlords have shown flexibility, understanding and commitment to protect businesses during an exceptionally challenging time”.
This final extension to protections from the threat of eviction will give landlords and tenants three months to come to an agreement on unpaid rent.
The government is clear that where businesses can pay any or all of their rent, they should do so.
Further guidance to support negotiations between landlords and tenants will also be published shortly.
The move will also support businesses worst affected by the pandemic, such as bars and restaurants, helping them to rebuild over the winter period.
Alongside this, communities secretary Robert Jenrick has also announced a review of the outdated commercial landlord and tenant legislation to address concerns that the current framework does not reflect the prevailing economic conditions.
This review will consider how to enable better collaboration between commercial landlords and tenants and also how to improve the leasing process to ensure that high streets and town centres thrive during recovery from the pandemic and beyond.
The announcement builds on the extra government support for businesses, including targeted VAT cuts, extension of government-backed loan schemes, grants of up to £3,000 for premises that must close, and £1.1 billion for councils to enable them to support businesses in their area.
Overall, the government has committed a package of over £280 billion of support for businesses and employees this year and the chancellor has confirmed an additional £55 billion for next year.
Jenrick said: “We are witnessing a profound adjustment in commercial property. It is critical that landlords and tenants across the country use the coming months to reach agreements on rent wherever possible and enable viable businesses to continue to operate.”
Tony Lorenz, founder of property firm Lorenz Consultancy, said: “The extension of the moratorium to March 2021 came as no surprise, as it is essential to prevent the collapse of the hospitality and leisure industry.
“What is surprising is the lack of clarity from the government on what support there will be for tenants when the moratorium is eventually lifted.
“The industry is in turmoil, and if the moratorium ends in March 2021 without the government including deferred payment directions, most tenants will face the prospect of having to pay a full year in rent whilst facing a tough trading environment, following the pandemic.
“With expectations of offices working to a 70:30 office versus home rule, we cannot return to pre-Covid trading conditions, and after a year of closed doors, the full deferred and future outgoings will not be affordable.
“Wise landlords need to work with tenants and compromise, accepting that empty premises may even force breaches of their loan-to-value.
“It’s always been our opinion that the industry must work together in recessions to keep the tripartite relationship of tenant, landlord, and banker together.
“With most landlords having a 70 per cent loan-to-value (LTV) ratio with their banks, significant falls in rents and property values mean they will then breach banking covenants, in turn catalysing a property loan banking collapse."
Lorenz added that he hoped "all parties, in the spirit of the festive season, will engage in meaningful discussions and financial settlements before the Christmas break, so that they all know their positions going into 2021".
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