Retailers protected from “aggressive” rent collection

Under pressure shops and other companies will be protected from “aggressive” rent collection and asked to pay what they can during the coronavirus crisis, the government has announced.

It says the majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics.

To stop these unfair practices, the government will temporarily ban the use of statutory demands (made between March 1, 2020 and June 30, 2020) and winding up petitions presented from Monday April 27 through to June 30, where a company cannot pay its bills due to coronavirus.

It says the move will help ensure these companies do not fall into deeper financial strain. The measures will be included in the Corporate Insolvency and Governance Bill, which business secretary Alok Sharma set out earlier this month.

The government is also bringing in secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

However, while landlords are urged to give their tenants the breathing space needed, the government is calling on tenants to pay rent where they can afford it or what they can, in recognition of the strains felt by commercial landlords too.

The latest announcements come on top of a package of business support measures, including a moratorium on evictions for commercial tenants for at least a three-month period.

Business secretary Alok Sharma said: “In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.

“Our unprecedented package of support can help commercial landlords, including through the recent expansion of the Coronavirus Business Interruption Loans Scheme.

“I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants. I am also taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the Covid-19 emergency continues.”

Under the new measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of Covid-19.

The legislation to protect tenants will be in force until June 30 and the government says it can be extended in line with the moratorium on commercial lease forfeiture.

Legislation will also be brought forward to prevent landlords using commercial rent arrears recovery (CRAR) unless 90 days or more of unpaid rent is owed.

The Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulatory Authority have also issued a joint statement encouraging investors and lenders to take into account the issues arising directly from the COVID-19 pandemic in responding to potential breaches of covenants.

Emergency legislation already introduced by government includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties.

The government has also announced new insolvency measures which will provide further support to businesses impacted by the Covid-19 pandemic.