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Still time to settle commercial property rent arrears

As the moratorium on business evictions comes to an end this month, landlords have confirmed there is still ‘breathing space’ to come to an arrangement over arrears.

Despite the moratorium coming to an end on 30 June, according to a group of commercial property giants, landlords and tenants have until the end of the year to find a solution to billions of pounds worth of pandemic-related rent arrears.

It comes as the Government says that its Code of Practice, published in response to the impacts of COVID-19 on landlords and tenants in the commercial property sector, is intended to reinforce and promote good practice amongst landlord and tenant relationships as they deal with income shocks caused by the pandemic.

The code supports businesses to come together to negotiate affordable rental agreements. It builds upon the discussions already taking place by giving those tenants and landlords affected by the crisis the tools to come to a mutually beneficial agreement and ensuring that best practice becomes common practice.

It is a voluntary code and does not change the underlying legal relationship or lease contracts between landlord and tenant and any guarantor, although both would be anxious to avoid costly legal battles.

A ban on business evictions came in last year and was most recently extended to the end of June. However, while the real estate sector hopes to offer more time for resolving historic bills, it wants new rents to be paid on time when a moratorium on business evictions ends.

Proposals to resume a “normal market operation” from 30 June come as the retail market starts to spring back into life from the latest lockdown.

Landlords British Land, Landsec and the British Property Federation recently set out their suggestions in response to the Government’s call for evidence on the best way to withdraw or replace measures that have helped high street firms ride out the virus crisis.

While some tenants have agreed rent holidays or deferrals with landlords during the pandemic, a number have not and had been worried they will not be able to pay the outstanding rent, after suffering months of closures in lockdowns.

Under the latest proposal from the property sector, normal rents would resume from the June quarter date and payments owed from before then will be ring-fenced. All parties would have until December to come up with plans, such as full repayments, deferrals or discounts for example.

Payments could be deferred until after this date if an agreement has been reached. Where an occupier and property owner are unable to reach a settlement, they would submit to binding arbitration.

For help and advice on matters relating to the commercial property sector, contact our expert team today. 

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