Government Extends Measures to Protect Businesses from Eviction – July 2021 Update

July 15, 2021

 

The Welsh Government has announced that the moratorium preventing landlords from forfeiting commercial leases for the non-payment of rent will once again be extended from 30 June to 30 September 2021.

The latest extension is intended to provide further support and ease the concerns of businesses across Wales facing eviction for non-payment of rent at a time of continuing economic uncertainty while the country recovers from the impacts of Coronavirus.

What is the moratorium against forfeiture for the non-payment of rent for business tenancies?

The moratorium against forfeiture was implemented under Section 82 of the Coronavirus Act 2020, and prevents landlords in both England and Wales from forfeiting leases of commercial property for the non-payment of rent during the “relevant period”.

The relevant period began in March 2020, and was originally expected to be a short-term measure ending on 30 June 2020. However, both the UK and Welsh Governments have since announced several extensions of the relevant period in light of the continuing impact of Coronavirus on businesses. The previous extension had been due to see the relevant period ending on 30 June 2021 in both England and Wales.

The UK Government’s latest announcement will see tenants of commercial property in England afforded further protection from forfeiture for the non-payment of rent until 25 March 2022.

In contrast, the Welsh Government’s approach has been to extend the relevant period for commercial tenants to 30 September 2021 in Wales. At present, it remains to be seen whether the Welsh Government will follow the UK Government and extend the moratorium beyond this date for tenants of commercial property in Wales.

What does this mean for businesses in Wales?

Although businesses should make every effort to continue to make their rent payments, landlords remain unable to evict commercial tenants in Wales if they miss any rent payments before the latest extension lapses on 30 September 2021.

The commercial tenant does not need to prove that their failure to pay rent was directly related to Coronavirus. Moreover, ‘rent’ encompasses any sum payable by a tenant under a relevant business tenancy, including the basic rent payable and any other payments under their lease such as a service charge, or the tenant’s contribution towards the cost of insuring the building.

For businesses within hard hit sectors including retail and hospitality, the latest extension will likely prove crucial in their long-term survival.

What happens when the moratorium against forfeiture expires?

The stability created by the extension to the moratorium against forfeiture will continue to provide some much-needed breathing space for struggling businesses, but it is not a permanent solution.

It must be remembered that during the relevant period, unpaid rent and any interest payable under the lease will continue to accrue. As soon as the relevant period lapses, landlords will again have the right to forfeit whether or not the tenant’s rent arrears accrued during the moratorium or before its implementation.

Additionally, there are other options available to landlords owed rental arrears by their tenant(s). For example, the Coronavirus Act 2020 does not prevent landlords from bringing debt recovery proceedings against their tenants. Moreover, landlords may use Commercial Rent Arrears Recovery to recover any unpaid amounts, though this ability has been significantly restricted as the amount of arrears must now equal 554 days’ worth of rent.

In practice, the best option in many instances is likely to be for the parties to come to agree a repayment plan for rent arrears. Should they intend to do so, the importance of both landlords and tenants obtaining legal advice beforehand cannot be understated to avoid their respective rights being compromised.

 

 

 

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