What is to happen with the UK high street’s rent shortfall?
20 August 2021 by Emily Wickington
The Financial Times has reported recently that there is a £6.4 billion shadow looming over British high streets in the form of unpaid rents; and with the moratorium on commercial evictions due to end on 25 March 2022, following a nine-month extension granted on 24 June 2021, there is only so much time for a solution to be created to handle the rent arrears.
It seems that the government is leaving landlords and tenants to come up with their own arrangements to handle the unpaid rent from the last 18 months, creating a bitter stand-off between some parties. However, they do have plans to mandate arbitration using legislation, for those landlords and tenants who cannot reach an agreement themselves.
The legislation is expected to ringfence the debt accrued from March 2020 until the restrictions (for each relevant sector) are removed. Therefore, from March 2022, landlords will once again be able to exercise their rights to evict tenants for non-payment of rent and rent debt incurred either side of the ringfenced period. Furthermore, commercial tenants should begin to pay rent in accordance with their leases from the time at which restrictions are lifted for their sector.
This new legislation will only apply to those tenants who were impacted by COVID-19 business closures, any tenant falling outside this scope can be evicted for non-payment of rental arrears accrued at any time. The government has made clear that any tenants who have the means to pay and were not affected by closures, should do so.
It has been announced that they will release details of the process and how it will work in due course but reiterates that it is only to be used as a last resort when good faith negotiations have failed to produce a resolution. As mentioned in the Financial Times this process should be sped up, as “the can may only be kicked down the street for so long.”
In any event and however this crisis is eventually resolved, the future of UK high streets will be determined in the following years, as there will only be a certain number of tenants, landlord and investors left standing to continue putting money into town centres all over the country.
If you are a business owner, tenant or landlord and require some help in lease negotiations, how to bring a lease to an early end or new property transactions, please do get in touch with our commercial property team contact Ellen Petersen on 01206 835316 or email [email protected].
*With thanks to The Financial Times 12 & 18 August 2021