Commercial landlords in Kent struggle to collect unpaid rent as legislation prioritises high street recovery

Kent’s high streets have suffered a significant downturn as a result of the Covid-19 pandemic, leading to a crisis for landlords as tenants continue to struggle to pay rent.

In July 2021, commercial property owners in the UK collected less than a fifth of what they were owed in rent due for the next three months to the end of September, according to commercial property management platform Re-Leased.

Jeremy Ferris, Partner at Kent law firm Furley Page, said: “Commercial landlords have had a rough ride since COVID-19 hit. The Coronavirus Act 2020 severely restricted their ability both to forfeit leases for non-payment of rent and seize goods in payment of arrears.

“The 18 per cent collection rate is the lowest recorded in a year, which shows that landlords are continuing to struggle with the fallout from the Covid-19 pandemic.”

On 16 June the government announced a further extension of the existing moratorium on landlord action for rent arrears to 25 March 2022. The extended moratorium, which prohibits landlords’ ability to forfeit leases of commercial property on the basis of non-payment of rent, was yet another significant blow to already beleaguered commercial landlords.

Jeremy continued: “Landlords have retained the ability to sue for unpaid arrears, which often provides the simplest and most cost-effective way to recover unpaid rents. Landlords are also generally unrestricted in their ability to take from rent deposits or pursue third-party guarantors.

“However, a swathe of cases earlier this summer dealt with defaulting tenants that wished to enter into company voluntary arrangements (CVAs), which allow a company to terminate its financial liabilities under a lease, provided that 75% of the creditors agree.

“The cases ultimately approved the companies’ arrangements, which represents a major setback to landlords, who will now receive no more than perhaps a substantially reduced turnover-based rent until the expiry of their leases and in some cases nothing at all. This is clearly bad news for landlords that had argued they were unfairly prejudiced as a class of creditor.

“These were landmark judgments in the commercial property world and it seems that, for the time being, the rescue culture clearly trumps the interests of individual landlords. As a result, it is imperative that landlords and their agents review any arrears regularly, so that quick and effective action can be taken whenever necessary.”

For advice and support about a range of commercial property issues, please contact Jeremy Ferris on jcf@furleypage.co.uk or call 01227 763939.