Struggling to pay your business’s rent? You’re not alone. Owners of retail and hospitality businesses have been especially hard-hit by the Covid-19 pandemic.
They are not the only ones feeling the pain, of course—simply the ones feeling the worst pain, generally. And landlords aren’t immune. In January, all three of Britain’s biggest landlords reported that leaseholders were delaying rent payments, or seeking payment holidays. According to the Financial Times, landlord Land Securities had received just a third of the rent owed by its retail tenants.
What to do? The good news: you do have options. The bad news: doing nothing is not a sensible option. It’s best to be proactive, and identify a path forward that best meets your circumstances.
How we got here
On March 23rd last year, the UK went into lockdown, with all non-essential businesses shuttered, and huge numbers of people working from home. The next quarterly rent payment date fell due two days later, on March 25th—and just 41% of retailers paid their rent.
Nor were rents withheld solely by retailers. Offices, light industrial premises, pubs, restaurants, hotels, leisure facilities—right across the board, businesses were affected. And so were suppliers to those businesses.
In response, the government acted. Landlords were prohibited from acting coercively to force tenants to pay. Leases could not be forcibly terminated, for example—a stipulation that initially ran until June 30th 2020, but which was subsequently extended as the pandemic wore on.
You may have read our earlier blog on this, Skipped your rent payment? Here’s where your business stands. Many people did read it—it was one of our most-read blogs in 2020. And today, because things have moved on, we’re taking a look at where things stand now, in early 2021.
Here we go again, again
The pandemic still rages. We’ve had lockdown #2, in November; and lockdown #3 from early January. The bottom line: if your business was feeling pain during lockdown #1, it will most likely have felt it again in lockdown #2, and lockdown #3.
Which means that you may have difficulty paying your rent. Because with no—or very little—money coming in through the door, the money may not be there to go out of the door.
Recognising this, the government has—once again—extended the protective measures that it put in place to help leaseholders last summer.
The law: where tenants stand now
The moratorium on lease forfeiture has now been extended to 31 March 2021. (This had already been extended twice; first to 30 September, and then to 31 December.) In simple terms, this means that until 31 March, you cannot be evicted for non-payment of rent.
However, in the absence of a separate agreement with the landlord, the rent and other sums due under the lease will still be payable and the landlord is free to pursue contractual or other enforcement for non‑payment.
That said, during this time, landlords are unable to use the Commercial Rent Arrears Recovery process unless they are owed more than 189 days or more of rent.
Usefully, failure to pay rent during this period cannot be relied on by the landlord as a ground to object to a new tenancy under the Landlord and Tenant Act 1954.
Leases under Covid: the reality on the ground
What to do? Doing nothing is neither sensible or advisable.
At this stage, you’re very likely to have already been in dialogue with your landlord, and come to some arrangement about previous months’ rent payments. Most commercial landlords are monitoring the situation closely, and many are working proactively with tenants, as suggested by the Code of Practice that the government introduced in June 2020.
Our view: it is best for tenants to again communicate with their landlords, rather than wait until 31 March. Although voluntary and non-binding, the Code of Practice provides a productive framework for discussion and negotiation, and it is useful for both sides to be able demonstrate that they have attempted to follow it.
It is also helpful to tenants to remember that in today’s business environment, few landlords will willingly trigger a rental void if other acceptable options are available.
Can we help?
These are unprecedented times. A year into the pandemic, many businesses are still shuttered or struggling to survive.
Through no fault of their own, their owners have found themselves struggling to pay rent on premises that in many cases they are not allowed to open for custom.
In such circumstances, it’s often the case that practical hard-headed advice, given from a business perspective, can make all the difference.
So if we can help, don’t hesitate to reach out.
