The UK Treasury has extended a ban on commercial evictions until March 2022, as the government seeks to protect businesses through the final stages of the Covid-19 pandemic.
British retailers and other commercial tenants have delayed payment of a £6bn rent bill that has built up during the crisis, as the public was ordered to stay at home for three separate lockdowns.
That “debt time-bomb” prompted fears that an early end to the moratorium would lead to the closure of thousands of shops as landlords demanded unpaid rents and pursued legal action to claim them.
But Steve Barclay, chief secretary to the Treasury, announced on Wednesday afternoon that the ban would be extended for a further nine months.
Barclay acknowledged the challenges faced by businesses, particularly in light of a month-long extension to existing coronavirus restrictions announced on Monday.
Existing debts accumulated during the crisis will initially be “ringfenced” in order to protect struggling tenants.
Barclay urged tenants and landlords to resolve debt disputes independently but added that the government would introduce legislation in the current parliamentary session establishing a binding arbitration process for cases where agreement could not be reached.
Tenants should resume paying rent in accordance with their leases if they were open and trading, he said.
At the same time, Barclay announced a further extension through the summer of a separate ban on “winding-up petitions”, under which struggling companies are forced to file for insolvency.
Kate Nicholls, chief executive of trade body UKHospitality, said the “measures will banish a grim shadow that has hung menacingly over hospitality since the Covid crisis began 15 months ago”.
“At last, this existential crisis for hospitality looks like reaching a fair conclusion, easing a path to recovery for a sector that can help the national economy back to prosperity,” she added.
The British Retail Consortium said the announcement was “very welcome” and had come “in the nick of time” for an industry fearing a wave of legal action.
“We’re also pleased to see the government adopt our proposal for binding arbitration where agreements between parties cannot be reached,” said BRC chief executive Helen Dickinson.
In April, the government launched a call for evidence on how to resolve the stand-off between tenants and landlords.
But Melanie Leech, chief executive of the British Property Federation, which represents landlords, said property owners had already provided “millions of pounds” to the most vulnerable tenants and that there was “no justification” for extending protections.
“The legislation required to focus protection on the most vulnerable and to create a clear exit path to deal with rent arrears should have been put in place for the end of this month,” she added.
Instead, Leech said an extension “will provide further opportunity for those well-capitalised businesses who can afford to pay rent, but are refusing to do so”.
The Treasury is resisting calls from business groups to tweak other Covid support measures to help companies after Prime Minister Boris Johnson extended the duration of the current, third lockdown.
Companies in sectors such as nightclubs, theatres and music festivals have called for further relief given that they will not be able to operate until late July at the earliest — a month later than originally planned.
But the Treasury is still pressing ahead with reductions next month to both the furlough scheme and business rates relief, as well as ending a programme that provided a state guarantee to trade credit insurance.