CBI paper calls on end to stalemate over commercial rents to drive economic rebound

Since March 2020, a government moratorium has been in place protecting commercial tenants from eviction, statutory demands and arrears recovery measures for non-payment of rent due to coronavirus impacts. After several extensions, with the success of the vaccination programme and the phased easing of restrictions on businesses, the government has committed to ending the current protections on 30 June 2021.

What has the CBI said?

The CBI brought together members from across the economy, including tenants, landlords and investors, to discuss options that optimise towards a market-led recovery. The CBI paper called on commercial tenants to resume paying rents as normal when the moratorium ends – with limited exceptions in cases of extreme financial difficulty caused by this year’s lockdown measures.

Through several drafts and consultative feedback, the CBI developed a wide-ranging position paper that reflects the need to protect the hardest-hit businesses that have been forced to close for much of 2021, while enabling normal commercial rent market activity to resume for the majority of occupier-landlord relationships.

In the paper, we propose that firms in the hardest-hit sectors should continue to be protected for a further six months, with companies that can demonstrate lockdown-related falls in revenue of more than 30% in 2021 given additional breathing space from legal action over non-payment of rent.

But with almost nine in 10 firms now open, an extension of protections for non-payment of rent should only support those in most need. The CBI proposals aim to compel most occupiers to pay full market rents due from 24 June.

The CBI also recommends that unpaid commercial rent debt accrued since the pandemic took hold in the UK – up to 23 June 2021 – should be ringfenced and negotiated separately between occupiers and landlords. Many tenant-landlord relationships have reached satisfactory agreements on both legacy rent arrears and future arrangements. The CBI proposes a six-month extension of protections in relation specifically to rent arrears, to encourage parties to arrange settlements that reflect the financial impact on both parties.

For firms that fail to negotiate in good faith, or where negotiations do not result in an agreement, the CBI has suggested that government establish principles of binding arbitration within which debts could be settled. The six-month grace period would allow time for adjudication capacity to be established.

• Read: the CBI’s press release announcing our position paper
• Read: Coverage of our position paper in the Financial Times and on PoliticsHome

What happens next?

Along with occupiers and landlords around the country, the CBI is waiting for a government decision on existing legislation covering commercial rents to be extended, amended or to expire from 30 June 2021, with an announcement anticipated as early this month as practicable.

When government plans are revealed, the CBI will work with commercial property tenants and landlords to build a picture of how the market is adapting and gather evidence of where rent payments and avoidance are occurring. We will also gather evidence of other consequences of an extension (or not) of protections.

Towards the end of 2021, the CBI will evaluate the impact of any extension of support for commercial tenants alongside the resumption of market activity, and take a position on whether commercial property costs or rules related to commercial rents require further intervention beyond the end of 2021. CBI members are encouraged to feed into our thinking on this.

Get involved

To stay in touch on the policy decisions concerning the commercial property landscape, or to share your business’s experiences of commercial property market activity, email [email protected].