Landlords banned from ‘aggressive debt recovery’ on commercial rents

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  • 23/04/2020
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Landlords banned from ‘aggressive debt recovery’ on commercial rents
The government is setting out a range of measures to prevent commercial landlords putting pressure on tenants who are unable to pay rents due to the coronavirus.

 

The move is designed to stop aggressive rent collection and closure measures being taken by landlords against businesses.

Statutory demands and winding up petitions issued to commercial tenants are to be temporarily voided to ensure firms do not fall into deeper financial strain.

Tenants will also be given more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

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

Any winding-up petition that claims 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 Financial Conduct Authority (FCA), 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.

 

Tenants must recognise landlords’ strains

The government statement said its changes would “further safeguard the high street and millions of jobs by helping to protect them from permanent closure during this time”.

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

Business secretary Alok Sharma (pictured), said it was vital that businesses were kept afloat and noted that the government was also trying to help landlords.

“I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants,” he said.

“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.

“The temporary emergency measures are designed to acknowledge the pressures landlords are facing while encouraging cooperation in the spirit of fair commercial practice.

“They also come on top of a substantial package of business support measures, including a moratorium on evictions for commercial tenants for at least a three-month period.”

 

 

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