UPDATED: The Government appears unlikely to extend tenant protection from commercial landlords who want to evict them for non-payment of rent because of Covid-19.
The business department had given shops, pubs and restaurants three months of protection from eviction for non-payment of rent during the coronavirus lockdown.
But a draft code of practice seen by the Financial Times on how landlords should treat commercial tenants as small businesses emerge from lockdown makes no mention of extending the eviction grace period.
Many businesses had assumed the current eviction suspension would be extended past June 24, the next rent quarter day.
If so, many businesses could find themselves forced out of commercial premises for non-payment of rent due to Covid-19.
Instead, the code, which is voluntary, states:
- Tenants should pay rent if they can, even if only partially
- Landlords who are in a position to show clemency should do so
- Tenants should prioritise paying service charges before rents
James Daunt, chief executive of bookshop chain Waterstones, told the FT that what is needed is statutory protection for tenants from aggressive landlords.
Daunt said: “As soon as current protections expire, I think there will be some pretty serious consequences for smaller retailers in particular.”
The Government hopes to publish the voluntary code of practice before the end of this week.
The draft code hopes that landlords and tenants will “share the property-related costs and business risks of the Covid-19 crisis in a proportionate and measured way” but stops short of anything mandatory.
Landlords would argue that small businesses have availed themselves of grants and year-long interest-free loans and should use that to pay rent.
Tenants say that they have been unable to trade for the past three months, still have to pay suppliers, and why should they alone shoulder the pain and not landlords?
On the other hand, landlords will not want to be lumbered with empty units if, as many predict, commercial rental values crash as the economy emerges post lockdown.
Extend rent moratorium
The Federation of Small Businesses has called for the three-month eviction moratorium to be extended, and for landlords to accept rent payments related to turnover.
Mike Cherry, national chairman, Federation of Small Businesses, said: “Many business owners were forced to put their lives on hold as the Covid-19 pandemic took over but as stores reopen from Monday, many will still be fighting to survive after almost three months of virtually no income.
“Now that the Government’s three-month moratorium on evictions is coming to an end, an extension is the only way to give hard-up businesses peace of mind that they won’t lose their premises anytime soon.”
The FSB said it had seen some good examples of landlords helping out small businesses and the self-employed with no money, with a full break on rent for a period of time, and then shifting to a deferral and repayment plan.
“But we are also seeing poor practice, with some landlords starting proceedings to recover rent,” said Cherry. “We have also seen some landlords pocketing the Small Business Grant through the business rates system, where morally that grant should be passed on to the small business concerned.”