UK imposes 3 month 'rent holiday' for commercial tenants

Tens of thousands of businesses struggling amid the coronavirus crisis in the UK can avoid paying rent for the next three months, the government has announced.

Under the directive, landlords will be banned from evicting commercial tenants during the next quarter, countermanding a rule which can see a tenant forfeit their lease within 28 days of rent not being paid.

The move is likely to be a lifeline for commercial tenants in sectors hit hard by a collapse in revenue, caused by stringent restrictions upon freedom of movement which are in place to combat the spread of Covid-19. Retail, leisure and hospitality businesses are particularly exposed, which often operate on thin margins.

Thousands of companies had been due to pay quarterly rent on Tuesday March 25, making the moratorium a potentially life-saving last-minute reprieve. 

Last Friday, UK prime minister Boris Johnson ordered all bars, restaurant, pubs and ‘non-essential’ retail shops to close. On Monday, gatherings of more than two people were banned. As a result, premises up and down the country shut their doors to customers.

The ‘rent holiday’ comes after reports that high-profile high-street brands have been planning to not pay rent. Alasdair Murdoch, the chief executive of Burger King UK, said he planned to pay staff instead of paying the landlords of the company’s 500 fast-food outlets.

The government and landlords were in talks about ways to limit the impact of the rent reprieve upon property owners, many of whom are heavily leveraged and could yet need a bailout by government, particularly if the Covid-19 crisis continues to affect economic activity for more than one quarter of 2020 - as looks possible.

Welcoming the rent holiday, Kate Nicholls, CEO of UK Hospitality, said: ‘With the next pending rent day falling this Wednesday, this move by the government is hugely welcome and will help to protect jobs across the sector.

‘While this removes the immediate cash flow pressure of quarter rent day, the government has made clear that the negotiation is now with lessee and landlord to reach a solution on payment.’

The Chancellor of the Exchequer, Rishi Sunak MP, said: ‘We are taking unprecedented action and doing so at unprecedented speed, because we know that businesses and their employees need help now.

‘That is why we are taking steps to change the law so that no company can be forced out of its premises due to loss of income. Alongside our support for workers and £330 bn of business loans and guarantees, this will help make a real difference to firms across the country trying to protect jobs.’