Moratorium on commercial landlord rent arrears remedies ends

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The new law now in place is there to help resolve certain remaining commercial rent debts says Paul Scully MP for the Department for Business, Energy & Industrial Strategy, and the Department for Levelling Up, Housing and Communities.

On 24 March 2022 the Commercial Rent Bill received Royal Assent, brought into effect to provide a legally binding arbitration process aimed at resolving certain outstanding commercial rent debts relating to the Covid pandemic.

Since March 2020, significant restraints have been placed on commercial landlords’ ability to recover arrears of rents from their tenants. However, landlords in England and Wales did retain some limited scope to recover rent and other sums due to them under commercial leases, despite the statutory and other restrictions, however. The laws in Scotland and Northern Ireland regarding arrears recovery were different.

Depending on the specific circumstances commercial landlords found themselves in, possible remedies open to them included, for example, recovering sums owed by tenants of commercial property from former tenants, guarantors, subtenants, or by claims in the county courts or High Court.

Code of Practice

On 9 November 2021, the government published an updated code of practice for landlords and tenants of commercial property. The code was voluntary, but was based on measures that are now given statutory force under the Commercial Rent (Coronavirus) Bill (the Bill), which was introduced to parliament on the same day.

The Bill also contained provisions to ring-fence arrears of rents for periods where the tenant had to remain closed, and to introduce a binding arbitration scheme of last resort for commercial landlords and tenants in England and Wales who were unable to come to agreement on those arrears.

The code replaced a previous code of practice issued in June 2020. The code was based on the principle that landlords and tenants should be negotiating how they can share the cost of pandemic-related commercial rent arrears where it is not possible for tenants to pay in full.

The code expected tenants able to meet their obligations to pay in full. However, for those unable to do so they were are expected to negotiate with their landlord “in the expectation” that the landlord waives some or all of the debt if they were able to.

The general moratorium ends

With the passing of the new law, now in place, it aims to resolve certain remaining commercial rent debts disputes accrued because of the pandemic, Business Minister Paul Scully has announced Thursday 24 March.

The ‘Commercial Rent (Coronavirus) Act 2022’ received Royal Assent on that day which means that a legally binding arbitration process will be available for eligible commercial landlords and tenants who have not already reached an agreement.

This will aim to resolve disputes about those pandemic-related rent debts and will help the market return to normal as quickly as possible.

The law applies to specific commercial rent debts for those businesses, including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be covered by the legislation.

Business Minister Paul Scully said:

“This new law will give commercial tenants and landlords the ability to draw a line under the uncertainty caused by the pandemic so they can plan ahead and return to normality.

“Landlords and tenants should keep working together to reach their own agreements where possible using our Code of Practice to help them, and we’ve made arbitration available as a last resort.

“Tenants who can repay their rent debts in full, should do so, and when they cannot, landlords should try to share the burden, so we can all move on.

“The government encourages commercial landlords and tenants to negotiate their own agreement where possible, so that an arrangement to resolve debt is mutually agreed, instead of resorting to the arbitration process.”

Continuing protection

Last Thursday 24 March was the last day of the general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales, but eligible firms remain protected for the next 6 months during which arbitration can be applied for or until the conclusion of an arbitration.

The moratorium has provided firms with necessary breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic, before the new law came into place.

Across the regions

The Code of Practice applies across the UK. The ‘Commercial Rent (Coronavirus) Act’ applies to England and Wales. Scotland has adopted an alternative approach to commercial evictions since the start of the pandemic, due to different property legislation and market conditions and there are differences for Northern Ireland.

More information

For those tenancies not covered by the new legislation, and were landlords and tenants have failed to reach agreement, either party can apply for arbitration unilaterally, as a backstop after negotiations have failed.

However, the parties are free to continue to negotiate outside of the legal arbitration process. The Code encourages the parties to use forms of alternative dispute resolution, such as mediation, if they wish to pursue this.

The window to apply for arbitration will be six months from 24 March and arbitrators may award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of 24 months.

The legal arbitration process is to be delivered by arbitrators that have gone through an approval process to demonstrate their suitability to administer the scheme. The government will publish a list of approved arbitration bodies in due course, and where a dispute is eligible, landlords or tenants will be able to apply directly to any approved arbitration body to appoint an arbitrator.

Further guidance will follow from the departments for landlords and tenants as well as to arbitrators on how the process will work for all parties: Department for Business, Energy & Industrial Strategy and the Department for Levelling Up, Housing and Communities

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ONS figures show an encouraging increase in retail footfall

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The Coronavirus pandemic, the associated lock-downs and the social distancing measures which the UK government imposed, dramatically affected retail footfall following March 2020, the figures then saw an unprecedented fall.

Even before the pandemic hit, the UK’s high streets and other retail outlets were experiencing tough economic times. Throughout 2019 retail footfall had dropped on a month by month basis compared to the previous year, with the exception of some holiday periods.

The trend was not peculiar to the UK’s high streets: visitor numbers in shopping centres were continuously suffering as well. The warmer summer months appeared to be struggling the most, with slight improvements in the winter season.

Turning point?

However, the pandemic induced decline appears to be coming to an end, with more optimistic figures coming out this week from the ONS.

The Office of National Statistics published data this week showing that the volume of UK high street retail footfall increased by 4% in the week to 19 March 2022, that’s over and above the previous week’s figures. This represents 83% of the level seen before the Covid pandemic in the equivalent week of 2019.

These figures are based on national retail footfall data supplied to ONS by Springboard, a provider of data on customer activity. They measure the overall UK retail footfall by high street, retail park and shopping centre categories.

Data analytics

A leading provider of retail data analytics, retail traffic counting, and customer sentiment tracking for leading brands, shopping centres, and high-streets worldwide, Springboard delivers data analytics to retail clients, helping them maintain their brand value and increase their revenues.

In retail parks the footfall figure was unchanged from the previous week at 96% of the level seen in the equivalent week of 2019 and in shopping centres there was a small increase of 1% from the previous week at 79% of the level seen in the equivalent week of 2019.

Region by region

The South West region saw the highest weekly figures for retail footfall in the week to 19 March. Compared to the equivalent week in 2019 the increased volume represents 90% of the daily activity recorded the equivalent week of 2019.

Rises in retail footfall were seen in 7 of the 10 UK counties and English regions in the same period, Northern Ireland topping the list with a rise of 21% in the week. The East of England and Scotland saw no change, while the South East saw a decrease of 1%.

In the same period, relative to the levels seen in the equivalent week of 2019, retail footfall was strongest in the South West of England, the East of England and Greater London, at 90%, 89% and 88%, respectively. Footfall was weakest in Wales, Scotland and East Midlands, at 79%, 80% and 81% of those levels seen in the equivalent week of 2019, respectively.

Economic activity

So overall, weekly retail footfall in the UK increased, a strong indicator of improved consumer activity. In the week to 19 March 2022 the overall UK retail rise was 2%. This is compared to the previous week and is 85% of the level seen in the equivalent week of 2019.

Government High Streets Task Force expert and ShopAppy founder, Dr Jackie Mulligan, says:

“Let’s hope this increased weekly footfall on the UK high street is the beginning of a longer term trend.

“The improved weather is almost certainly one factor in the increase but we are also seeing a greater emotional bond between people and their local high street shops, which emerged during the pandemic.

“We need footfall to exceed 2019 levels to help fuel the real recovery of this country’s small bricks and mortar businesses, as many are having to cope with significant levels of debt accrued during the pandemic.

“There are no end of challenges for shoppers, with the cost of living crisis significantly eroding people’s spending power, but we’re urging people to shop local whenever they can.

“Ahead of Mother’s Day, go to your local high street shops to buy flowers, treats and food, because they need all the support they can get in the current climate.”

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Arbitration process launched in bid to sort out commercial rent arrears

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A new law aims to help resolve disputes between commercial landlords and tenants over pandemic-related rent debts.

The Commercial Rent (Coronavirus) Act 2022 establishes a legally binding arbitration process for landlords and tenants in England and Wales who have not already reached an agreement. The law applies to protected rent debt – commercial rent debts of businesses including pubs, gyms and restaurants which had to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times won’t be included.

Code of practice

Business Minister Paul Scully says it gives commercial tenants and landlords the ability to draw a line under uncertainty caused by the pandemic so they can plan ahead and return to normality. He adds: “Landlords and tenants should keep working together to reach their own agreements where possible using our Code of Practice to help them, and we’ve made arbitration available as a last resort. Tenants who can repay their rent debts in full should do so, and when they cannot, landlords should try to share the burden, so we can all move on.”

Eligible firms

The ban on commercial evictions and restrictions on Commercial Rent Arrears Recovery in England and Wales has now ended, but eligible firms will be protected for the next six months; during this period, those landlords will be unable to forfeit the lease, use commercial rent arrears recovery, or bring a debt claim to recover the protected debt.

Either party can apply for arbitration unilaterally, as a backstop after negotiations have failed. Arbitrators can award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of 24 months.

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Court rules ignorance is no excuse for unlicensed HMO

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A landlord who blamed his managing agent for renting out his property as an HMO has been handed a £20,000 fine.

Nathaniel Jones claimed he didn’t know Crown UK Lets had rented out the four-bedroom property in Hadley Street, Camden, as an HMO, after he tasked the firm with letting it to a single family. He signed up in 2018, paying 10% of the monthly rent for the service and then paid between £1,000 and £2,000 a year after he negotiated a lower charge and paid in cash.

Serious fire risk

A First Tier Property Tribunal heard that the house was found to be occupied by five people sharing a kitchen and bathroom in December 2020, following a referral to the Rogue Landlord Unit. Smoke/heat detectors were missing, the fire doors were inadequate, and the layout posed a serious fire risk to the tenants.

Jones said he had not paid any repairs or maintenance charges as he had left the property in very good order and that it was likely nothing was required. He told the tribunal that he did not carry out any property inspections and believed that he had a full letting and management agreement.

No defence

The tribunal said it was not persuaded by his excuse as there was no defence of ignorance of the law. It added that the landlord did not take proper responsibility for the property and fined him for not licensing the HMO or complying with HMO regulations. The judge ruled: “The fees paid would indicate a very basic service and not one sufficient to properly manage a large residential property in London. The applicant made no enquiries about the expertise of the agents, its portfolio and the professional qualifications of those involved.”

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Biggest UK event for property investors and landlords makes full return

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The Property Investor Show is back at London’s Excel next week for a packed two days of informative sessions and networking.

Now in its 21st year, the event – on 1^st and 2^nd April – brings together thousands of current and would-be property investors with up to 100 property sector experts and exhibitors, and promises to be bigger and better attended than ever. The event had a near two-year absence during the pandemic and was relaunched on a smaller scale last October 2021 when it still attracted more than 4,000 attendees despite Covid restrictions.

Free sessions

Over the two days, visitors can take part in 65 free seminar and panel sessions hosted by and including the biggest names in UK property, property finance and taxation, legal, housebuilding, Proptech and landlord and tenancy services; Landlord Action’s Paul Shamplina, Richard Blanco, landlord and property expert and star of House Hunters International, Vanessa Warwick of Property Tribes and Ben Beadle, CEO of the National Residential Landlords Association are just some of those on the bill.

Panel Sessions include: The State of the UK Property Market, Is It Possible To Buy Property Below Market Value? And Why Your Next Buy-to-Let Should Be Through A Limited Company.

No restrictions

Show director Mike Doyle says that with Covid restrictions gone, the show is expected to be busier than ever. “This is especially true given the way that the property market has performed in the last two years and with buyer demand and price growth at record levels,” he adds. “The event provides the opportunity for current and prospective property investors to research the entire property investment journey from sourcing to funding, the legal process, taxation and the new technology that now assists landlords in making their portfolios work ever more efficiently.”

See here for full details of the show and to register.

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This landlord sold her portfolio of 23 properties in one go in only 5 days

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It’s a theme that’s becoming ever more common, if you were in any doubt, now is the time for us to sell up our portfolios, cash in and retire while the market is still high, and before the window closes.

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