Concern grows among landlords and legal experts over proposed Coronavirus insolvency legislation

Draconian new insolvency laws are set to cause commercial landlords big problems. The second reading of the Corporate Insolvency and Governance Bill – being debated in the House of Lords today – aims to help tenants stave off insolvency during the crisis but has big implications for landlords. While the Government wants to safeguard tenants, […] ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Concern grows among landlords and legal experts over proposed Coronavirus insolvency legislation | LandlordZONE.

Concern grows among landlords and legal experts over proposed Coronavirus insolvency legislation

Draconian new insolvency laws are set to cause commercial landlords big problems.

The second reading of the Corporate Insolvency and Governance Bill – being debated in the House of Lords today – aims to help tenants stave off insolvency during the crisis but has big implications for landlords.

While the Government wants to safeguard tenants, particularly those on the high street, against aggressive debt recovery actions during the lockdown, there are fears the result will be landlords with reduced negotiating power and less incentive for corporate tenants to pay rent.

The Bill effectively removes the insolvency process from the landlord’s armoury in rent recovery as they’ll be blocked from chasing rent payments for at least 90 days.

It includes a temporary ban on landlords using winding up petitions between 27th April to 30th June, where a tenant can’t pay its rent bills due to coronavirus.

Landlords also won’t be allowed to start recovering rents unless they’re owed at least 90 days of unpaid rent, while the previous minimum was seven days.

Accountancy group Moore claims the legislation weakens property investors’ negotiating power.

Tip too far

Director Chris Tate says: “The scales now threaten to tip too far in favour of big multinational corporate tenants against landlords who might be small private investors or pension funds.

“For some smaller landlords the suspension of rent payments could put them under acute financial pressure.”

He adds: “This latest bill will further incentivise corporate tenants to not pay rent even if they can afford to. The legislation should at least allow landlords to charge a sensible level of interest for the late payment of rents over the last few months, if this is not stipulated in the lease.”

Moore suggests the Government should consider asking businesses that have reported a turnover of £45m or more last year and forecasted free cash-flow for the next quarter of 5% of sales to pay the rent due or a proportion of it.

Read more about government attempt’s to regulate the commercial property market during the crisis.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Concern grows among landlords and legal experts over proposed Coronavirus insolvency legislation | LandlordZONE.

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Evictions extension will lead to rent arrears mountain, research predicts

Tenants will take up to 14 months on average to repay rent arrears built up during the lockdown, it has been claimed. Based on research by deposit replacement scheme Ome, the figures point to looming problems for some landlords as tenants stop paying their rent. This is made worse by last Friday’s bombshell from housing […] ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Evictions extension will lead to rent arrears mountain, research predicts | LandlordZONE.

Evictions extension will lead to rent arrears mountain, research predicts

Tenants will take up to 14 months on average to repay rent arrears built up during the lockdown, it has been claimed.

Based on research by deposit replacement scheme Ome, the figures point to looming problems for some landlords as tenants stop paying their rent.

This is made worse by last Friday’s bombshell from housing secretary Robert Jenrick that the June deadline for his evictions ban is to be extended for a further two months to August.

Although Jenrick said his decision was based on a desire to protect tenants from eviction while they face losing their jobs or falling ill during the pandemic, it will also hugely increase the likelihood of a significant rent arrears mountain.

Lockdown legacy

Ome reckons that on average tenants who fall into arrears will owe £5,754 by the end of August, assuming they stopped paying their rent in March, when the lockdown began.

Based on tenants being able to set aside 20% of their take-home income to pay their rent arrears, it would therefore take just over 14 months for those owing six months’ rent.  

“Tenants and landlords alike are in a very tough spot,” says Matthew Hooker, co-founder of Ome.

“The Government has provided both tenants and landlords with some initial respite in the form of no evictions and mortgage holidays, however, this is only a temporary fix to a problem that isn’t going to go away any time soon.”

But some campaigners go much further, and Mayor of London Sadiq Khan last week refused to endorse calls for rent arrears to be waived once the crisis is over.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Evictions extension will lead to rent arrears mountain, research predicts | LandlordZONE.

Source : Landlord Zone More   

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