Rent Deadline – Doomsday or not?
I have often provided some commentaries on the whole subject regarding the impasse on the rent arrears that have arisen as a direct result of the Covid-19 pandemic.
Various commentators have also given their opinions on how the impasse, particularly between landlords and tenants, can in some way be resolved.
There have been comments in the press about the government attempting to bring forward some Code of Practice or, preferably, legislation to in some way bridge any gaps that may exist between landlords and tenants. A very good article that appeared in the Times on Monday 7 June by Mark Allan who is chief executive of Landsec and Simon Carter who is chief executive of British Land went to the nub of the issue and I can do no better than to replicate the article below.
Whether the government addresses with unlocking on June 21 or shortly after, we can take comfort that there are strong indicators that the economy is getting back on track.
Throughout every stage of the “roadmap”, the British public has demonstrated its desire to recommence experiencing life. Consumer confidence is bouncing back due to record levels of household savings, with people now happy to spend more of their disposable income on the things they enjoy.
With the retail sector making a comeback, it was encouraging to see restaurants showing an increase in seated diners of 75% compared with 2019, on the Saturday after indoor hospitality reopened. As spending priorities change, as more people spend time shopping and eating out locally, smaller businesses stand to benefit.
This is clearly adding to consumer confidence, with job postings in the hospitality, leisure, and tourism sectors rising by 52% in the month immediately preceding 17 May and continuing to tick up every week.
Albeit, certain sectors still need to resolve the ongoing issue of withdrawing the moratorium on enforcement action and managing the accrued rent arrears. The moratorium while the government announced would be the ‘final extension to protections from the threat of eviction’, by 31 March 2021, further extended to 30 June 2021, has once again been pushed back and is set to continue till 25 March 2022, further enhancing options to support its withdrawal.
Reactions and lobbying from landlords, hospitality businesses and retailers depict a divide on this issue. However, it appears that all parties have more in common, by way of wanting to bring an end to the moratorium and their long-term interests
It was Landsec and British Land in partnership with the British Property Federation that first conveyed the idea that their long-term interests are very much aligned to put forward to withdraw the moratorium. The aim is to work collaboratively with the government, partners, and peers in hospitality and retail to get the country back on track post-pandemic. This means that landlords and occupiers must work together constructively, as economic partners, to find a resolution. The pandemic has made a marked impact on all businesses and each participant has a role to play in recovering from it.
In coming to a conclusion, the possible solution has been based on three popular principles.
The first is ring-fencing arrears but lifting the moratorium for rents incurred from March 2022 onwards. The second is owners and occupiers using the ring-fence period (say, six months) to agree and negotiate how to resolve arrears, using an enhanced code of practice as a guideline, and having the ability for payments to be deferred beyond this period where the parties are in agreement.
These measures should enable the government to support those businesses that need it whilst at the same time getting the market back up to the normal operation.
The third and final element is a defined backstop of binding arbitration, to encourage constructive negotiation between all parties, and for them to act in good faith.
It would appear that a solution to the commercial property moratoriums and accrued rent arrears is within reach — a solution that would enable the market to return to normal operations while still protecting those businesses that have been significantly affected by the pandemic.
By placing the focus on what unites the market as businesses, rather than what divides, the suggestions can turbocharge the UK’s recovery from the pandemic — creating even more jobs and unlocking investment in our high streets.