Editor: A further nine-month extension to the commercial property eviction moratorium in many cases only delays the inevitable – it’s unlikely in itself to save the occupier but could cause terminal damage to the landlord. It’s a classic kicking-the-can-down-the-road situation.
Many commercial tenants will continue to take advantage of the rules, although some may genuinely have no other choice. It’s important to note that the rules don’t just apply to principal rent, but also to other sums payable by occupiers under the terms of their leases, transferring the burden of supplying services and buildings insurance to landlords.
The moratorium also fails to differentiate between alternative types of businesses and tenants – or turnover – and could therefore lead to a power imbalance between smaller landlords and bigger tenants who have thrived during lockdown. We’re likely to see landlords struggling to service debt and suffering serious cashflow issues as a result.
Landlords will also be unable to seek the recovery of any debts or take actions usually available to them until the period ends – even then, they may well be left with a tenant that isn’t worth suing, or has already suffered an insolvency.
Landlords will be eagerly awaiting details of the new arbitration mechanism intended to assist with and streamline the disputes resolution process following the lifting of the moratorium, and also further details of the so-called ’ringfencing’ of debts accrued during lockdown – and what this looks like in legal terms.
More than ever, landlords should use the upcoming months to assess their position and seek to resolve matters with their tenants. Landlords and tenants should have frank discussions about what is going to happen between now and the end of the moratorium, with a view to giving both parties the best chance of surviving and co-existing.
It makes sense for all involved that as long as tenants are able to pay rents, they should do so and not use the moratorium as some sort of free credit.
Paul Burton, real estate partner, JMW Solicitors
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