With both landlords and tenants feeling the financial strain and uncertainty arising from the current coronavirus crisis, reports about a potential government scheme to support the commercial property sector could prove very welcome.
Many retail tenants failed to pay their rents on 25 March and landlords have been left wondering how best to try to encourage engagement about this after the recent changes to CRAR and the government’s announcement about restricting statutory demands and winding-up petitions. (See https://www.charlesrussellspeechlys.com/en/news-and-insights/insights/real-estate/2020/further-changes-to-landlords-remedies-for-recovering-commercial-rent-arrears/ for details of these changes.)
As June starts to loom – and with only a limited release of lockdown likely before the next quarter day - landlords are increasingly concerned about the reality that they also cannot forego income indefinitely. Whilst the government has said that it understands the “serious pressures” on landlords and is “working with banks and investors to seek ways to address these issues and guide the whole sector through the pandemic”, it has been unclear whether landlords will be given any additional support. The current uncertainty is equally unappealing for tenants, who face the risk of being required to pay interest and costs as a result of the failure to pay rent.
The scheme apparently now being discussed between the government and those representing landlords would see some level of government financial support for rent bills for “furloughed” shops and restaurants. Given the speed at which the government has moved to alter the remedies available to landlords, it is hoped that it can move equally swiftly to provide the support needed by the sector at this most challenging time.
The proposed space furlough scheme reportedly under discussion is modelled on a similar plan introduced successfully in Denmark. It would see tenants contribute some rent and landlords agree to a reduction in payments, while the Treasury uses taxpayer funds to plug the gap. Sources speaking to The Telegraph said the proposal could focus on the hardest hit sectors, such as retail and leisure, and be a “sliding scale” of support.