Permanent solution needed for commercial rent debt mountain

25 March 2021
  • Property Management Director, Philip Angell, Cooke & Arkwright

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As we reach another quarter day no resolution is in sight to the problem of Covid related commercial rent arrears. As anticipated, the Welsh and Westminster Governments have announced an extension of the moratorium preventing forfeiture for non-payment of rent due to the pandemic until after 30 June 2021.

Also, the total number of days’ outstanding rent required for CRAR to be used is to be increased to 457 days between 25 March and 23 June, and 554 days between 24 and 30 June. This revised threshold means that landlords cannot commence CRAR unless a tenant owes rent for the whole lockdown period from last March and also has arrears from the December 2019 quarter. 

The Westminster Government had stated in December that they would not extend these protections beyond 31st March, but are now reacting to the subsequent lockdowns imposed. It is unclear whether the measures limiting the use of statutory demands and winding-up petitions will be extended beyond 31 March 2021, but that is thought likely. 

This announcement will provide further breathing space for tenants but will, no doubt, be the source of great frustration to landlords who have tenants who have not paid any rent despite being able to do so. 

The estimates of the amount of commercial rent debt that has built up varies, but it may exceed £5 billion and a permanent solution to the problem needs to be found.  The Government has announced a call for evidence on what steps it should take after 30th June. It may introduce a phased withdrawal of these protections, although many tenant bodies are calling for legislation to permanently ease the burden of this debt. 

Commercial landlords have received no assistance from government so far and I suspect any subsequent announcement may not be good news for them.

Cooke & Arkwright advised ABP over the life cycle of its major waterfront mixed use development schemes in Cardiff and Barry. The quality and commitment of their people working alongside us were a key factor in the successful delivery of those schemes.

Byron Lewis, Estate Surveyor, Associated British Ports