Additional Protection for Business Tenants

Finance Minister Conor Murphy has today extended emergency protection for business tenants having difficulty paying rent on commercial leases as a result of the pandemic until March 2022. As an adviser to commercial landlords who are owed rent and also to commercial tenants who find themselves in arrears’ difficulty I am reflecting on this development.

The special provision in the Coronavirus Act 2020 which was first applied at the end of March 2020, is being extended once again, until March 2022, giving a total of 24 months special protection, which is in line with England and Wales.

England and Wales are already looking to that point in time and legislative measures are already under way to avoid a cliff edge occurrence at the end of March 2022. One only has to take a look at the gov.uk website under publications to see that the government already has advanced plans to legislate for England and Wales to “ring-fence” rent debt accrued during the pandemic by businesses affected by enforced closures and set out a process of binding arbitration to be undertaken between landlords and tenants.

It would appear that this is to be used only as a last resort, after bilateral negotiations have been undertaken and only where landlords and tenants cannot otherwise come to a resolution. Ahead of the system being put in place, the government has said that it will publish the principles, which they will seek to put into legislation in a revised Code of Practice, to allow landlords and tenants time to negotiate on that basis.

Section 82 of the Coronavirus Act 2020, which prevents landlords of commercial properties in England and Wales from being able to evict tenants for the non-payment of rent, will continue until 25 March 2022, unless legislation is passed ahead of this, in order to provide sufficient time for this new process to be put in place.

Government says that it is clear that those tenants who have not been affected by closures and who have the means to pay, should pay and by this I understand that they mean pay in full their contractual rental obligation, if they can. Additionally, government expects commercial tenants to begin paying rent as per their lease from the point of restrictions being lifted for their sector.

As soon as legislation is passed, in England and Wales, the commercial tenant protection measures will only apply to “ring-fenced” arrears. This includes rent debt accrued from March 2020 by commercial tenants affected by COVID-19 business closures until restrictions for their sector are removed.

The intention is that landlords will be able to evict tenants for the non-payment of rent prior to March 2020 and after the end of restrictions for their sector and who have not been affected by business closures during this period. The government argues that the measures announced by government – the extension of current provisions, publication of a strengthened Code of Practice, and the development of a system of binding arbitration – triggers the start of a return to ‘business as usual’, by balancing protecting landlords and supporting those businesses most in need. They argue that it will ensure that many viable businesses can continue to operate, and that debts accrued as a result of the pandemic are quickly resolved to mutual benefit.

The Assembly has to date fallen into step with England and Wales on issues of commercial tenant protection. For such a small jurisdiction where, in the main over the past 18 months Landlords and Tenants have worked collaboratively to find a mutually acceptable resolution, it may well be seen that the implementation of such a system in Northern Ireland is overkill and unnecessary. Certainly the removal of their contractual rights by legislation, has been a source of frustration for any landlords who have found some of their tenants tenants taking liberties and standing behind the shield of the protective legislation, regardless of circumstances.

Last year I wrote of the need for Landlord and Tenants to play fair with one another in their dealings and in their negotiations. In the main I have found that we have been able to resolve the many difficulties that have come our way. As lawyers we had many of the normal tools removed from our toolbox to assist us in resolving disputes. In the main we adapted and found solutions. I suspect more formal and informal Mediation has been done on the last year in Northern Ireland than in the prevailing three or four years.

One thing that is for certain though, is that both commercial landlords and their tenants would like to know what the future holds now so that they can plan ahead. Throughout the COVID period we have found that too many changes to the rules have been sprung at the last moment. We are well into September when the extension that was to run out at the end of this month has been announced. England and Wales have known their position and had a line of sight to March 2022 for months. Hopefully we will have some clarity soon.

If you would like further information or advice, please do not hesitate to get in touch with Darren Toombs.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.