Government extends commercial eviction ban until March 2022 amid fears of ‘debt time-bomb’

Retail and hospitality sectors alone have built up £5bn in rent arrears which landlords cannot yet pursue them for

The government has extended a ban on evicting businesses from their premises for nine months after a backlash against the continuation of Covid restrictions.

A ban on commercial evictions was set to end on 30 June but Steve Barclay, chief secretary to the Treasury announced on Wednesday that it is to be extended to 25 March 2022.

Existing debts accumulated during the crisis will be “ringfenced” in order to protect struggling tenants. A new arbitration mechanism will be introduced introduced to help tenants and landlords resolve disputes over those bad debts.

Retail and hospitality industry groups warned last week that the two sectors had built up £5bn in rent arrears while many businesses are still operating well below pre-pandemic levels.

Mr Barclay told the House of Commons the government had called for evidence on further actions to resolve companies’ debts “in recognition of the importance of jobs in the many affected businesses at the heart of local communities”.

The government plans to introduce legislation to support “orderly resolution” of debts that have resulted from Covid-19 business closures.

“We will introduce legislation in this parliamentary session to establish a backstop so that where commercial negotiations between tenants and landlords are not successful, tenants and landlords go into binding arbitration,” he said.

“Until that legislation is on the statute book existing measures will remain in place, including extending the current moratorium to protect commercial tenants from eviction to 25 March 2022.”

Following Boris Johnson's announcement on changes to the easing of lockdown measures, more than 1,100 nightclubs across the country will remain closed until at least 19 July, a month beyond a previously planned 21 June re-opening.

Pubs and restaurants must also continue with social distancing measures which reduce capacity and mean that some venues are loss-making.

Hospitality businesses had called for further financial support to make up for the loss of trade. But the chancellor declined to extend the furlough scheme or reduce the contributions that firms must make to furloughed staff's wages.

Shadow chancellor Rachel Reeves said the government has “failed to deliver” an economic package that supports businesses.

She said in the Commons: “People have given up so much over the last year, we have pulled together and shown the best of our country, people have done everything that was asked of them and much, much more. We should not be in this position today.

“Businesses and workers don’t deserve to have the rug pulled from under their feet at the eleventh hour. We want to see businesses make it through this pandemic and thrive again because businesses are an important part of what makes our country so great and they are essential for our economic recovery.”

It is feared that thousands of businesses could be evicted once landlords are able to pursue them for rent debt built up during the pandemic.

A further extension to the commercial rent moratorium is likely to provoke anger among commercial landlords who have seen their rent receipt plunge since March last year.

In the first quarter of this year, just 74 per cent of rent was collected by landlords within 60 days of falling due.

In April, the government launched a call for evidence about how it can deal with the problem of commercial rent arrears when the current moratorium ends.

The prime minister’s official spokesperson said: “We're considering responses to a recent call for evidence on the next steps with commercial rent and we'll set our response shortly.”