Landlords expected to write off £7bn Covid-driven arrears

Commercial landlords have missed out on more than £7 billion in unpaid rent during the pandemic and have been told they will be expected to write off any Covid-related rent arrears if tenants are struggling to pay.

Owners of offices, shopping centres and other commercial properties were owed £6.97 billion as of the end of June, according to Remit Consulting.

The government stepped in last year to help out businesses in difficulty because of the pandemic, ensuring that tenants that missed rental payments would not be evicted by their landlord. That protection runs out next March and the government has set out new laws for how landlords and tenants should resolve outstanding debts.

First, tenants unable to repay arrears in full should speak to their landlord “in the expectation that the landlord waives some or all of the rent arrears where they are able to do so”. The British Property Federation estimates that an agreement has been reached in about 80 per cent of cases.

If talks fail, the government has established legally binding arbitration to “help the market return to normal as quickly as possible”. It also has promised to protect commercial tenants from court judgments and bankruptcy petitions in relation to rent arrears.

Matthew Ditchburn, at Hogan Lovells, the law firm, said the new arbitration scheme, designed to bring tenants and landlords to the negotiating table, may have the opposite effect: “Many landlords who want to engage and negotiate settlements have used the threat of court action to bring tenants to the table. Now that final remedy is to go.”