Make sure you’re not in their way
There are several people in life that you should go out of your way to try and cultivate a good relationship with.
These include receptionists; cleaners; servers and bar people at your favourite restaurants and possibly most important of all if you’re a business owner or director – your commercial landlord.
The entire pandemic period from 2020 to 2022 has reset a lot of existing rules, law and conventions – possibly forever in some cases so it’s important to look back on what happened to commercial rent during this period.
Between April 2020 and March 2022, there were some temporary protective measures in place for commercial tenants that struggled to pay their rent during the period.
There was also the creation of the Commercial Rent (Coronavirus) Act 2022 which established a new arbitration scheme concerning ring-fenced commercial rent arrears that grew during periods of mandated closures.
There was a moratorium on the forfeiture of commercial leases for non-payment of rent (or other sums such as interest or service charges) so commercial landlords are once again able to consider forfeiture for non-payment of rent under a procedure know as CRAR – (Commercial Rent Arrears Recovery) although not specific ring-fenced debt incurred during the pandemic period.
The threshold for action has now been reduced to the pre-pandemic position of seven days principal rent arrears.
What does this mean?
If a firm is more than seven days behind with its rent then landlords can take action.
They have various options available to them including:
- Statutory demand – This is a formal demand for payment that requests the tenant to pay the outstanding rent within a specified timeframe – usually 21 days.
- Winding up petition – if the statutory demand is ignored or cannot be met then the landlord can ask a court to enforce a winding up petition against the tenant. This will force the compulsory liquidation of the company with the aim being to be recover arrears through the forced sale of their assets
- Late payment charges – depending on the terms of the lease agreement, the landlord may also be able to charge for late payment interest or fees for overdue rent
- Rent deposit – If one has been provided by the tenant and under the terms of the tenancy, the landlord may draw down on it to cover any unpaid rent
- Forfeiture – if the lease agreement contains a forfeiture clause then the landlord has the right to terminate the tenancy and repossess the property subject to any notice periods and legal procedures
Chris Horner, insolvency director with BusinessRescueExpert, said: “While small and medium sized business tenants enjoyed some respite and protection from creditors including landlords for two years during the pandemic period, everything has changed now.
“They should also be aware that before landlords reach for legal remedies, there also have several other tools they can deploy that will make life harder for commercial renters.
“These include increasing rents, deciding not to renew leases or make the terms more restrictive including shorter periods, rent escalation clauses or stricter financial covenants.
“They could also find that landlords are less responsive regarding maintenance and repair issues which could also lead to expensive consequences.
“Not every rent arrears dispute ends in court or with pistols drawn. Negotiating and mediation can produce temporary solutions that allow businesses to concentrate on returning to profit before clearing the arrears.
“These can be temporary rent holidays, deferrals or even outright rent reductions. If the company is able, they could also arrange an informal payment arrangement where they pay small or more frequent payments aimed at reducing their overall debt.
“Of course, this all depends on the fundamental financial foundations of the renting company.
“If they’re unable to meet their rent arrears and other debts including bounce back loans then they should be looking at other formal insolvency solutions such as a CVA or administration to let them restructure and rebuild the business back stronger.
“Or if there is no viable way for them to get out from their accumulated non-secured arrears including bounce back loans then they can look at a company liquidation process which would also see these debts written off and allow them to move on or begin again – debt free.”
Rent arrears or missing payments can often be symptoms of bigger and nastier financial problems for a business.
While the pandemic had a negative impact on most companies, it also affected landlords too so many are trying to recoup as much outstanding debt as they can from their tenants and others while they are able to.
If your business is behind on rent or you think it’s only a matter of time before it will be – get in touch with us today.
One of our team of advisors will work with you to get an accurate picture of your business and the challenges it faces and be able to give you impartial and effective advice on what options you have moving ahead.
These decisions will await you in the future but the most important one – the first one – is to decide to make your appointment and you can do that straight away by clicking the link above.