Thursday June 17, 2021

Government extends relief to businesses

In a move that will prompt relief among businesses across the UK, the government has extended its rent and eviction protection measures until 25 March 2022.

Previously, its rent moratorium – introduced at the start of the pandemic to prevent commercial landlords aggressively pursuing rent arrears and evictions – was due to expire at the end of June. With the full re-opening of the economy pushed back by a further four weeks, the new date provides those businesses most in need with an extended period of relief in which to agree practical solutions with their landlords in relation to outstanding debts.

It is currently estimated that UK businesses – particularly those forced to close for long periods, such as those in the retail and hospitality sectors – have accrued almost £6 billion in unpaid rent since March 2020. Those debts will now be ring-fenced to provide protection to tenants that have encountered financial difficulties during the pandemic.

Crucially, though, the extended terms of the moratorium are only designed to support those businesses worst-affected – with cash-generative businesses expected to begin repayments if they can. And, while statutory demands and winding up petitions will also remain restricted for a further three months, protection around wrongful trading is not being extended. As such, directors will once again be at personal risk if they continue to trade without a viable future plan in place.

In addition to the moratorium extension, the government has also announced a new arbitration mechanism designed to help tenants and landlords resolve disputes over debts caused by rent arrears. The new legislation, which has yet to be explained in detail, is likely to encourage the use of longer-term payment plans or, in some cases, the partial waiving of debt by landlords.

We view this as a positive step forward for businesses in under pressure sectors. Many firms have already been working to find consensual agreements for future payment terms. With the government now encouraging and endorsing these conversations formally, this approach should become more widespread and commonly adopted – avoiding a wave of business failures.

Businesses with viable business models will still make good tenants, but they will need time to trade out of their debt – this short-term break provides that time.

That said, tenants need to be proactive in approaching their landlords to engage in discussion and present workable solutions. Landlords have been equally hard-hit and, going forward, both parties will rely on each other’s support. A co-operative approach to dealing with any arrears will be key to everyone’s financial health.

Should negotiations fail, it is expected that the new legislation will establish a formal, staged payment plan for rent arrears. With a positive and proactive approach on both sides, landlords and tenants can ensure the need for such measures is mitigated – allowing them to focus on the recovery ahead.