The Governments ban on commercial evictions, which was imposed during the first lockdown, and has recently been extended until the 30 June 2021.
Whilst everyone appreciates that the pandemic has had a devastating effect on many businesses throughout the country, particularly those on the High Street, the blanket ban on evictions for non-rent payment oversimplifies a complex situation.
The premises from which business tenants trade from (or potentially used to) are also owned by businesses in the wider sense; be they private landlords, investment companies, institutional pension or insurance companies … and even local authorities. The fact is the buildings are held to make money, and the rental income is part of the business activity of the landlord.
In many situations, I am sure landlords and tenants have had sensible conversations about rent, and other lease matters, based upon the individual circumstances. However, there are also instances where discussions have broken down, or have never started and tenants have taken it as a green light to stopping paying rent.
We are aware that one of our clients has a tenant who has indeed ceased paying rent, removed fixtures from the premises and has no apparent intention of re-opening when the lockdown ceases.
The client has therefore developed a plan to re-purposed the space for the wider benefit of the building, but is powerless to implement it as the landlord cannot obtain vacant possession (despite exploring interim dilapidations and a S146 notice, as the breaches are not sufficient to warrant forfeiture of the lease) and even if repossession were possible, it takes six months for the relief of forfeiture to pass and then obviously the time to do the necessary work.
So, whilst this lockdown time could be used to undertake the refurbishment, in readiness for the property to be remarketed or reoccupied following repossession, the lack of any available action creates another financial body blow for the landlord.
From a landlord perspective, it may feel like the tenant always has an unfair advantage.
Another of our clients said:
“The Government’s Code of Practice, which encourages all parties to work together to protect viable businesses and ensure a swift economic recovery, is simply an unenforceable guideline. What is needed is a solution which offers both tenant and landlord a level of protection. What are the sanctions if the tenant blatantly does not engage with a landlord, despite the landlord’s best efforts?
We are currently in a situation where this ban is defying hundreds of years of contract law. A tenant can shrug their shoulders, make no attempt to pay the rent and even damage a property, whilst the person that actually owns the building has to sit on the side-lines and watch the value destruction as an idle spectator.
Moreover, a tenant can wait until the moratorium is over and then go into administration. Until then, they don’t even pay a nominal rent for the storage of their items.”
So whilst the government has taken steps to protect those businesses directly impacted by the Covid-19 lockdown rules, the landlords who are affected by lack of rent payment must continue to struggle.
The British Property Federation’s Melanie Leech has argued the moratorium has created a hostile environment, with some well-capitalised businesses bypassing their rental obligations and taking advantage of the situation.
The majority of landlords have no desire to evict good, honourable and viable business tenants, who they need to prosper as empty properties generate no income. And it is worth remembering that not all landlords are large corporations with unending resources – they are also made up of individuals and small businesses themselves, who also contribute taxes, employ staff and feed into our economy.
The government said it is launching a call for evidence on commercial rents to help monitor the overall progress of negotiations between tenants and landlords, but it appears no date has been set.
In the meantime, the reality is that the lost rent will have implications for private and commercial property investors and all of us who have pensions or other investment products tied up with commercial properties.