The government has extended a ban on commercial evictions. This is reportedly putting the survival of some of Britain’s biggest landlords at risk.
The ban on commercial evictions has allowed some of the worst-hit industries to survive the bleak days of the pandemic. This ‘moratorium’ has been welcomed by those in the retail and hospitality industries especially. Businesses that have recently been allowed to open are undoubtedly relieved at finally being able to earn an income once again. Establishments that opened on the 19th of July for the first time since the pandemic, are amongst those most likely to be relying on the eviction ban to survive.
The ban stops landlords from taking legal action to recover rents from commercial tenants and, most importantly, prevents landlords from evicting tenants. It has already been extended several times. The eviction ban was due to stop, but Chief Secretary to the Treasury Steve Barclay has said that the government will now extend it until March 25th 2022
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Is The Extended Eviction Ban Viable For Struggling Property Companies?
This is not welcome news for property companies, many of who are experiencing their most significant rent arrears ever. Large amounts of unpaid rent have caused cash flow issues for property companies, leaving them looking to the government to allow them to evict non paying tenants. As a result, The Times has reported that many major property companies are in billions of pounds of debt.
Senior leadership from major property developers and the property industry’s major bodies agree that the government is enabling bad behaviour. James Raynor of Grosvenor (one of the largest privately-owned property companies globally) says that landlords are being ‘deprived of their rights under the law. Owners and occupiers clearly need to work together in sensible partnership’.
Small businesses are essential to communities, and big companies are crucial to the economy. Is the government putting their priorities in the right place? Melanie Leech, of the British Property Federation, says that the government is failing to see that commercial property owners are vital to the health of our town centres. She adds that businesses ‘who can afford to pay rent, but are refusing to do so, continue their abuse of government and property owners’ support and will cast a long shadow over investment to build back better.
What About Smaller Commercial Landlords?
Steve Barclay has clarified that tenants should start to pay rent again as per their lease, or what has been agreed with their landlord, as soon as restrictions are lifted to allow them to start trading as normal again.
That advice is well and good, but there are tenants with the ability to pay rent as normal but no intention to. The law protects tenants for as long as the eviction ban is sustained.
The Chief Secretary to the Treasury has also announced that the government will introduce a service to resolve disputes between landlords and tenants over unpaid debts during the crisis.
We have noted considerable objections from a number of our smaller commercial landlords insurance clients who feel they are being held hostage and denied income by a government initiative intended for large companies with billions of pounds in reserve to fall back on.
The Eviction Ban Is Saving The Worst-Hit Establishments
On the other hand, countless retailers, restaurants, bars and pubs have been deeply and irreversibly affected by the pandemic. It is easy to forget that even establishments currently enjoying a lift in restriction need time to trade to recoup losses. These businesses need to be able to trade as normal without the threat of eviction to repay debts in a sustainable way that doesn’t put their survival further at risk.
Mike Cherry, national chairman of the Federation of Small Businesses, said the extension was vital for commercial tenants who in many cases ‘were weeks away from facing legal proceedings for rent they could not afford.’ This appears a fair point but should the private landlord sector be providing the subsidy when the Government has supplied some much support elsewhere?