A solution to the moratorium on enforcement action and accrued arrears
Created by British Land and Landsec, in partnership with the British Property Federation
The moratorium was an important temporary measure at the time it was first introduced. However, as trading conditions begin to normalise and UK consumer confidence continues to strengthen, it is right that the Government is now looking at how to withdraw the moratorium in a way that protects those businesses that have been hardest hit by the pandemic.
Property owners have worked hard over the course of the pandemic to support their customers, and we are urging the Government to create the conditions to bring property owners and occupiers together to negotiate and constructively manage rent arrears where arrangements have not been concluded.
We have developed a practical solution that seeks to protect occupiers and jobs, and which enables the market to return to normal as the economy re-opens.
Our proposed solution separates the treatment of rent arrears from the period when businesses were impacted by trading restrictions from future rents as the current restrictions lift.
With the final step in the roadmap scheduled for June, normal market rent operations should resume from the June 2021 quarter date with all rental obligations being due and payable from that time. This reflects not only a vital step towards restoring normal market conditions, but also the strength of trading that many brands have seen since the third lockdown began to lift.
With regards to rent arrears, the proposal would ringfence payments outstanding from March 2020 to the June 2021 quarter date, extending existing protections in relation to these arrears to December 2021 and enabling property owners and their customers to agree equitable concessions where appropriate. Payments could be deferred until after this date if an agreement has been reached. Where an occupier and property owner are unable to reach a settlement, they would submit to binding arbitration. An enhanced code of practice would support all parties in reaching a fair outcome.
We believe this phased approach would address the issue of rents owed, while giving occupiers the breathing space they need to recover from the effects of the pandemic, provide property owners with the certainty required to enable new investment into town and city centres, and help drive economic recovery from Covid-19.
Mark Allan, Chief Executive, Landsec: “Nobody wants to see good businesses fail, particularly responsible landlords who have invested, either through capital expenditure or rent concessions, in those businesses, and are focused on creating thriving retail locations for the long term. This proposal is a practical solution, with the interests of all parties at its heart. By separating historical rents owed from future rents, this will provide a pathway back to normal market conditions that will help drive economic recovery from Covid-19.”
Simon Carter, Chief Executive, British Land: “We believe this is an equitable way forward for property owners and their customers as we start to emerge from the pandemic and the UK economy opens up. Difficult problems require compromise on all sides, and our proposal recognises and addresses the challenges the property, retail, hospitality and leisure sectors have faced over the past year. Looking ahead, the priority must be a move towards more normal market arrangements, while recognising that arrears will take time to work through and require cooperation from all parties”.
Melanie Leech, Chief Executive, British Property Federation: “The majority of property owners have already reached agreement with their tenants, providing millions of pounds of support to those tenants hardest hit by Covid-19. However, as public health restrictions ease and consumer confidence and spending continues to grow, we now need to find a fair solution to resolve the discussions that are stalled so that all parties can focus on the future.
“This proposal addresses this head on, ring-fencing historic rental debt – giving businesses more time to get back up onto their feet and to agree with property owners how much of their rent debt they can afford to pay – while ensuring we can reinstate rent payments moving forward. A return to normal market conditions is vital for the millions of pensioners and savers invested in commercial property, and will enable property owners to make investment decisions today that will underpin new regeneration across the country, creating new jobs and fit-for-purpose town centres, and supporting our nation’s Covid-19 recovery.”
To view the full proposal on the BPF website, click here.