Landlords, Tenants and Rent Arrears - the view from 2021
Section 82 of the Coronavirus Act 2020 (“the Act”) was introduced as a temporary measure to prevent landlords from terminating a lease due to non-payment of rent, following the impact of Covid-19. This has been extended a couple of times and at the time of writing lasts until the end of March 2021.
Enough with the legal jargon, what does this actually mean?
Commercial property leases usually contain default provisions relating to rent arrears and forfeiture. With the extension of the Act, commercial property tenants will be relieved to know that they cannot be evicted by their landlords until the beginning of April 2021, if they are unable to maintain rent payments. However, before getting carried away, tenants should bear in mind that this is solely in relation to rent arrears, and does not extend to any other breaches of the lease.
What does this mean for landlords?
Although landlords cannot regain ownership of the property as quickly as they may be used to and let the property to another tenant, there may be some benefits to the extension of the Act; for example:
- The landlord may be more likely to receive rent owed from the tenant, as they will have more time to earn, save and agree a payment process;
- The landlord and tenant will be able to develop a long lasting relationship, making the tenant more likely to renew their lease; and
- The landlord may therefore save time and expense that would otherwise need to be incurred in actively searching for tenants and possibly renovating the property, before re-letting.
Nevertheless, if conflicts relating to rent arrears are to be avoided, effective communication and negotiation between landlords and tenants is essential.
Provided tenants notify landlords of any issues they are experiencing with rent payments, as soon as they become aware of them, landlords are more likely to negotiate. This may involve temporarily changing rent due dates, or reducing the amount due for that period and recovering it over a period of time, once the tenant’s financial situation improves.
Obviously, what is negotiated and agreed in each case will depend on the specific circumstances of the landlord and tenant involved; but there is certainly an argument for saying that allowing flexibility earlier on is preferable to engaging in lengthy and costly conflicts at a later stage.
For further information, please contact our commercial property team on 0113 202 9550.