Midlands law firm Thursfields Solicitors is urging landlords and tenants to maintain a dialogue and work together following the government’s decision to extend the ban on evictions from 30 June to 30 September 2020.

Commercial Property director Rob Pettigrew said the extension would provide further opportunities for positive communications and he welcomed the introduction of a Code of Practice for Commercial Property.

“The idea of the Code is to provide clarity for businesses when discussing rental payments and to encourage best practice so that all parties are supported.

“While the Code is voluntary, it encourages tenants to continue to pay their rent in full if they are in a position to do so and advises that others should pay what they can, while acknowledging that landlords should provide support to businesses if they too are able to do so.”

In practical terms, the government’s action means that commercial tenants should not be forced out of premises if the tenant misses a rental payment in the next three months.

The government is also legislating to prevent landlords using commercial rent arrears recovery (CRAR) unless they are owed over 189 days of rent, and an amendment to the Corporate Insolvency and Governance Bill has been tabled which will extend the temporary ban on the use of statutory demands and winding-up petitions (where a company cannot pay its bills due to coronavirus) until 30 September.

However, Pettigrew cautioned:

“Tenants need to remember however that, unless a different agreement has been reached, rental payment is only deferred, not written off, meaning that once the protection ends landlords can pursue debts of half a year’s rent or more, plus interest, plus costs, which could lead to forfeiture and insolvency proceedings.

Landlords still have the option of suing for the debt which could result in the tenant being subject to a County Court Judgement (CCJ).

While this would not lead to a possession claim or insolvency, it might put sufficient pressure on a tenant to move rent to the top of the list of bills to pay.

The majority of tenants will want to avoid being subject to a CCJ.

Additionally, where there is guarantor in place landlords have more options as guarantors are not protected by any of the recent legislation.

Pettigrew added:

“In our view the best practice to adopt involves engaging with your landlord or your tenant, as a lack of communication can often lead the other party to reach conclusions that are not helpful.