The CBI has urged occupiers and landlords of commercial properties to collectively take “decisive” action to address commercial rent challenges on the path towards a full economic reopening.
Whilst it believes most tenants should resume paying rents as normal when emergency legislation protecting from evictions and statutory demands ends on 30 June, it said there should be an exception in cases of “extreme financial difficulty” caused by lockdowns.
The CBI now proposes that firms in the hardest hit sectors should continue to be protected for a further six months, with companies which can demonstrate lockdown-related falls in revenue of more than 30% in 2021 given “additional breathing space”.
It added that an extension of protections for commercial tenants should “only support those in most need”, now that almost nine in 10 firms are now open, and there is still continued government support for business costs and the easing of social restrictions.
In addition to extended rent protection, it recommends that unpaid commercial rent debt accrued during lockdowns should be “ringfenced and negotiated separately” between occupiers and landlords.
It also proposes a time-limited extension of protections in relation to rent arrears, to encourage parties yet to reach agreements to “arrange settlements which reflect the financial impact on both parties”.
The government should also set out principles for binding arbitration on rent debt and help to deliver decisions where negotiations fail or businesses refrain from negotiating, it added. This could include recommended levels of ‘debt forgiveness’ based on the overall impact of the pandemic on businesses’ finances and a structure for repayment of arrears.
CBI chief UK policy director, Matthew Fell, said: “With the success of the UK’s vaccine programme, a watchful easing of social restrictions and business confidence growing, now is the time to optimise commercial property interventions towards getting all parts of the economy back to business.
“The blanket government protections for non-payment of commercial rents should be lifted. While some sectors remain heavily restricted or fully closed, ongoing protections should be targeted towards the firms most at risk in these sectors.”
He added: “The conversation about commercial rent debt needs to be dealt with separately. There is a huge deficit in unpaid commercial rents, which both tenants and landlords acknowledge is unlikely to be fully recovered.
“The majority of tenants and landlords have already come together for adult-to-adult conversations to settle commercial rent arrears; those businesses yet to enter into negotiations should now do so and work hard to reach an agreement, or risk court decisions that may be less favourable.”