April 14th, 2022. Mark Hughes
Commercial Rent Arrears Recovery in a Post-Covid World
After two years of turbulence caused by covid lockdowns and various restrictions, a number of businesses have had to remain closed often leaving commercial rent unpaid.
To help businesses that were forced to close during lockdowns, the UK government put in place new measures called the Coronavirus Act 2020 to protect commercial tenants from being evicted. As this temporary act expired on 25th March 2022, there are now new concerns within the property industry for business owners struggling to pay rent and landlords in rent arrears.
Here we explore commercial rent arrears recovery, known as CRAR, options for businesses and landlords post-covid, what happens to commercial tenants before they’re evicted and the options available to help both businesses and commercial landlords recover from COViD-19.
Commercial Rent Arrears Recovery
With so many businesses being forced to close during the COVID pandemic, many commercial landlords had rent arrears from tenants who weren’t able to trade or keep up with their bills. Whilst the Coronavirus Act was a protection scheme for tenants, this has now ended leaving both landlords without rent and tenants facing potential eviction.
Now the CRAR act has expired, there are a few legal options, for example, landlords can start including something called forfeiture. This is when tenants forfeit a business tenancy or lease on the grounds of not paying rent, allowing landlords to re-enter the property as the tenant breaches the agreement (i.e. paying rent).
When the CRAR was in place, it meant landlords had to have at least 554 days of unpaid rent from tenants before they could take action such as drawing down the rent deposit, forfeiture or starting debt recovery through the courts.
For commercial landlords looking to recover any rent arrears, you can now take action such as drawing down the rent deposit, forfeiture or reaching a private repayment agreement between you and your tenant, as the UK government outlines on their website.
The Commercial Tenant Eviction Process
If landlords and tenants can’t reach a private agreement, and the business isn’t likely to re-open now restrictions have been lifted, there is the option to start an eviction process. The commercial tenant eviction process usually starts with the landlord filing a possession claim at the county court known as a CCJ.
Commercial property law is designed to protect both commercial landlords and their tenants. Reaching a court filing is often a financial burden that both parties want to avoid, so reaching an agreement outside of court is often a much better option for landlords and tenants.
With the change in law coming back into force, it could influence more commercial landlords to start the eviction process with tenants who haven’t reopened since the lockdowns, creating more opportunities for other businesses to rent properties.
This significant change could also have a negative impact on those considering investing in commercial buy-to-lets as a profitable business venture as empty properties don’t pay the bills.
That said, our experienced commercial team feels this change will bring fresh opportunities to businesses needing premises, helping to fill that tenancy gap for commercial landlords.
Helping Businesses and Landlords Recover from COVID
Supporting both commercial businesses and the landlords who own property is essential to keep the UK economy going, so having access to financial help and advice is important.
As the end date for Coronavirus support ends and lockdown restrictions lift, it’s now returning to ‘business as usual’ for both landlords and tenants. This means reaching a financial agreement for both parties or considering further financial support is vital to help move forward.
For landlords out of pocket, drawing up a payment plan with tenants is a great way to ensure rent is repaid back in a sustainable way for the tenant. And for tenants who have fallen behind, being able to reopen the doors and start earning again with a payment plan in place helps get a business back on its feet without any added pressure.
After living through a global pandemic many businesses have experienced hardship, so approaching rent arrears recovery in an amicable way for both parties will help businesses recover quicker.
Here at Pure Property Finance, we offer invoice factoring services that help businesses recover money owed to them. Something that could consequently help them pay invoices or other financial obligations they have.
You can learn all about this and how it could help you in our Ultimate Guide to Invoice Factoring.
Whether you’re a commercial tenant or landlord, if you’re looking for more information on commercial finance options for your business, our brokers are always on hand to help in any way they can. Contact us today to find out what finance option suits you most.
Article By Mark Hughes
April 14th, 2022
Mark has 15 years’ experience within the financial industry working for high street banks and specialist brokers and now focuses on Bridging finance and Second charge loans.
He would describe his style of brokering as being heavily based on knowledge and efficiency.See more articles by Mark