The Coronavirus Act came into force earlier this week, including a ban on forfeiture of commercial leases for non-payment of rent for the next 3 months.

This will particularly affect RPs who are landlords of commercial units, and this article considers the practical steps that you can take to minimise the impact on your business.

What has been the impact so far?

We anticipated that the ban on forfeiture of commercial leases for non-payment of rent would have an impact on the levels of rent recovered by commercial landlords. The first figures that we have seen, following the latest quarter day (25 March) suggest that the impact has been significant.  

It appears that a number of tenants have not paid their rent or service charges when they fell due. Estimates are that £1 billion to £2.7 billion of rental income has not been paid, particularly in the retail, hospitality and serviced office industries.

What are the rights of commercial landlords?

Although forfeiture rights have been temporarily suspended, rent does still fall due in the usual way. This means that other options are available to landlords, including statutory demands and debt claims (and potentially winding up petitions). 

Landlords will regain the right to forfeit if rent remains outstanding at the end of the period.

What should landlords be doing?

We would encourage all parties to have open and constructive discussions about what can be paid and when. Landlords do still have “teeth”, as outlined above, but do still need to be realistic about the current market. Involve your valuers where necessary to support your proposals. 

Landlords should also keep their lenders informed, and be aware of potential breaches of funding covenants.

Conclusion

At this time, more than ever, we need to work together to ensure the survival of businesses and the economy. Landlords will need to consider each case individually, so that a viable solution can be found. One size won’t fit all, because some businesses are more impacted by the pandemic than others, and in most instances a temporary position may be appropriate.

How Capsticks can help

If you have any queries around what's discussed in this article, and the impact on your organisation, please speak to Susie Rogers or Mike Regan to find out more about how Capsticks can help.