Government To Review Commercial Lease Legislation After Property’s Lost Year

The UK government is to undertake a review of UK landlord and tenant legislation next year after the coronavirus exposed the problems in the way commercial property is leased. 

Secretary of State for Housing Robert Jenrick announced the review at the same time as confirming that the current ban on landlords evicting commercial tenants for nonpayment of rent will run until the end of March. 

The Ministry for Housing, Communities and Local Government said the review of commercial landlord and tenant legislation will be launched early next year and will “consider a broad range of issues including the Landlord & Tenant Act 1954 Part II, different models of rent payment, and the impact of Coronavirus on the market.”

The review will aim to address concerns that the current framework does not reflect the current economic conditions, MHCLG said.

It will consider how to enable better collaboration between commercial landlords and tenants and also how to improve the leasing process to ensure high streets and town centres thrive as the economy recovers from the pandemic and beyond.

Even before the pandemic, troubles in the retail sector were exposing the problems with the UK’s system of long leases with upward-only rent reviews. Retailers feel that the system is inflexible and doesn’t reflect changes in demand for retail property. Landlords feel that contracts freely entered into should be honoured. 

Such a review was undertaken at the beginning of the 2000s, but the government ultimately decided to keep the current legislation in place. 

That extension of the moratorium to 31 March will mean landlords will have had just shy of a year without the legal means to collect rent from tenants. 

Estimates from bodies like the BPF and Revo estimate that retail and leisure tenants pay between £8B and £14B. And data from bodies like Re-Leased show that these tenants are currently paying less than half of their contracted rent. 

“Ministers have rightly highlighted and commended our sector’s commitment to supporting tenants during what has been an incredibly tough year — and we recognise that those hardest hit will need further support through the winter,” BPF Chief Executive Melanie Leech said. “Any tenant who has not already engaged with its property owners, and is truly struggling, should now come to the table and be transparent about what they can afford. Equally this announcement signals the end of the road for those who can pay rent but have so far refused to. The Government has made clear they must now pay their debts.”