Commercial Property: Rent Arrears

Thursday 11th March 2021 Written Statements

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Eddie Hughes)]

I am today informing the House that I have laid a statutory instrument that will extend the moratorium on commercial landlords’ right to forfeiture for the non-payment of rent (section 82, Coronavirus Act 2020). The moratorium that was due to expire on 31 March 2021 has been extended via statutory instrument by three months and will now expire on 30 June 2021, protecting businesses from eviction. This will protect employment as businesses reopen and many more individuals, including renters, can return to work.

In addition, the Ministry of Justice will also lay a statutory instrument to extend the restriction on the use of the commercial rent arrears process by landlords. This measure will increase the total number of days’ outstanding rent required for the commercial rent arrears process to be used to 457 days between 25 March and 23 June, and 554 days between 24 and 30 June. This measure will continue to provide protection to tenants of commercial leases with rent arrears accumulated during the coronavirus period, while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020.

Accompanying restrictions on the service of statutory demands and winding-up petitions, implemented through the Corporate Insolvency and Governance Act 2020, are currently in place until 31 March. We are conscious of the impact of those measures not remaining in place while others are extended; the Government are therefore considering the future of these measures in the light of what has been announced today.

The Government had previously announced that the previous extension until 31 March 2021 would be the final extension to these measures. However, this was before the discovery of the new UK variant of covid-19 and the national restrictions announced by the Prime Minister on 4 January 2021. These restrictions have prevented many tenant businesses from being able to trade normally and have undermined negotiations regarding rent arrears and ongoing lease terms because tenants have lacked certainty regarding when they may be able to resume trading. This has necessitated the introduction of a further extension to give time for the current national restrictions to be relaxed and for tenants to be able to negotiate with their landlords with some certainty over their ability to trade and so pay rent and accumulated rent arrears, given some businesses will only reopen in June at the earliest under the Prime Minister’s road map.

We are aware of concerns that some tenants who could pay rent are refusing to do so, and of the potential impact of this on the commercial landlord and investment sectors, and on specific sectors who receive much of their income via rent, including the ports sector.

However, the Government are clear that this measure is not a rent holiday: where a tenant is unable to pay in full, landlords and tenants should be coming together to negotiate in good faith, using the principles set out in the voluntary code of practice we published in June. This recommends that those tenants who can pay in full should do so, those who cannot should pay what they can, and those landlords who are able to grant concessions should do so. This code of practice and approach was supported by a wide range of sector bodies representing tenants and landlords. The Government will be publishing further guidance to support this code and help facilitate negotiations between landlords and tenants shortly.

Beyond this point, the Government’s current position is to support landlords and tenants to agree their own arrangements for paying or writing off commercial rent debts by 30 June. This is supported by the code of conduct published by the Government last year, setting out best practice for these negotiations. But if these discussions do not happen and there remains a significant risk to jobs, the Government are also prepared to take further steps.

We will therefore launch shortly a call for evidence on commercial rents to help monitor the overall progress of negotiations between tenants and landlords. The call for evidence will also set out potential steps that the Government could take after 30 June, ranging from a phased withdrawal of current protections to legislative options targeted at those businesses most impacted by covid-19. We would welcome a broad range of feedback to this call for evidence.

England, Northern Ireland and Wales are covered by the protection from forfeiture provisions in the Coronavirus Act. Section 82 relates to England and Wales, and the Welsh Government have announced an extension until 30 June 2021. Section 83 relates to Northern Ireland, who are also considering a similar extension. The Scottish Government shall be implementing similar measures under their separate legislation.

If a Member has any further inquiries by giving notice of a parliamentary question or by otherwise raising the matter in Parliament, the Department will be happy to provide a response.

[HCWS844]