Hospitality 'unreservedly welcomes' extension to commercial eviction ban

By James McAllister

- Last updated on GMT

Hospitality 'unreservedly welcomes' extension to commercial eviction ban lease forfeiture moratorium

Related tags Rent arrears Rent Lease Government

The lease forfeiture moratorium, which prevents the repossession of commercial premises if businesses are unable to pay their rent due to the pandemic, has been extended until March 2022.

Confirmation of the extension was delivered in the House of Commons this afternoon (16 June) by Chief Secretary of the Treasury Steve Barclay, who said the decision 'strikes the right balance between protecting landlords and supporting those businesses that are most in need'.

A new arbitration mechanism will also be introduced in legislation to help landlords and commercial tenants resolve disputes over arrears.

"We will introduce legislation in this parliament session to establish a backstop so that where commercial negotiations between tenants and landlords are not successful, they go into binding arbitration,” Barclay said.

“Until that legislation is on the statue book existent measures will stay in place, including extending the existing moratorium in place to protect tenants from eviction to 25 march 2022.

“All tenants should start to pay rent again in accordance with the terms of their lease or as otherwise agreed with their landlord.”

The extension has been 'unreservedly welcomed' by trade body UKHospitality, which estimates that around £2.5bn in rent arrears has been built up by hospitality firms during the course of the pandemic.

“These measures are wholly welcome and will banish a grim shadow that has hung menacingly over hospitality since the Covid crisis began 15 months ago," says Kate Nicholls, chief executive of UKHospitality.

"The legislation will form a strong bedrock for negotiated and fair settlements that can help heal the damage that the pandemic has wrought, and is a hugely positive signal that the Government has been listening to our sector, and acted to ease its plight.

“Thankfully, many landlords and tenants have managed to come to an amicable arrangement over rent arrears, but many could not and the Government’s announcement brings in an equitable solution where there is a sharing of the pain.

“These are unprecedented measures but wholly merited and justified in these unprecedented times, bringing some stability back to an uncertain and unsettled property market. At last, this existential crisis for hospitality looks like reaching a fair conclusion, easing a path to recovery for a sector that can help the national economy back to prosperity.”

The announcement of the extension follows a Government call for evidence​, launched in April, about the best way to withdraw or replace these protections in place for businesses, in order to support the millions of jobs that they underscore.

At the time, the Ministry of Housing, Communities and Local Government warned: “If there is evidence that productive discussions between landlords and tenants are not taking place, and that this represents a substantial and ongoing threat to jobs and livelihoods, the Government will not hesitate to intervene further.”

Data published by Cedar Dean back in January highlighted the scale of the rent crisis facing the sector​.

The report, which surveyed more than 400 leading hospitality and retail businesses, representing over 10,000 locations across the UK, found that 77% of hospitality operators were being forced to look at restructuring or insolvency options, with current rents remaining unaffordable for the vast majority of businesses.

Some are still concerned that more needs to be done to avoid a wave of business failures in the future.

Leading commercial property advisor Anthony Lorenz describes the moratorium as a 'timebomb' that could lead to a 'nuclear explosion' in March 2022.

He thinks that binding arbitration, proposed by the Government, must be the 'cornerstone' of rebuilding the hospitality sector.

“Some landlords have voluntarily offered Tenants rent free periods – others have done so, subject to extending leases, imposing break clauses and adopting other asset management opportunities, to ‘get their money back’," he explains.

“Others who have been ‘named and shamed’ in the press have tendered no help or otherwise only offered deferment. That is just kicking the can down the road. It creates a timebomb even today and a nuclear explosion in March 2022.

“The Government’s planned enforced arbitration should contain significant penalties for tenants who are found to be making unfair proposals, especially where their business hasn’t suffered and they could have easily paid their rent. Landlords who have not offered to ‘share the pain’, should be likewise punished.”

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