Real estate’s GBP 6bn time bomb

Despite real estate’s increased optimism, there is one huge cloud on the horizon: an estimated GBP 6bn of unpaid commercial rent since March 2020 in the UK alone.

The moratorium on enforcement action, preventing landlords from pursuing tenants for unpaid rent, has led to a stand-off, with landlords keen to collect money they believe is rightfully theirs and many tenants continuing to protest that they cannot pay.

In June the industry received a bitter blow with the news that the moratorium would be extended until March 2022, albeit with the government advising tenants that they should pay rent in accordance with their leases if they are open and trading.

Danielle Drummond-Brassington
With the moratorium on evictions extended, Danielle commented in the Evening Standard and Reuters. She notes that: “This is extremely disappointing.” “Nothing is being done here to address or recognise the financial pressure landlords are facing, or that there are tenants out there who can pay but have been taking advantage of the government’s measures. A short extension would have been understandable, but March 2022 is neither reasonable nor sustainable.”
Danielle Drummond-Brassington, Head of Real Estate Dispute Resolution, CMS

Asked what the consequences of a continued extension of the moratorium on unpaid rent would be, the response was stark: 60% said it would hit pension funds, 67% said it would encourage more rent default, 47% said it would hit investment by landlords and 46% said it would undermine good estate management.

Only 25% thought in the long term it would support tenant recovery. Tech and ESG can transform real estate, but tenants still need to pay their rent. It is the best owners and properties that will find a solution, with weaker assets and defaulting tenants likely to be repurposed and swept away.

What consequences do you think an extension of the moratorium will have? (Real estate sector)

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