What are the law changes that have already been made to support commercial landlords, tenants, lenders and borrowers?
On 16 May 2020, a temporary law change was made giving commercial tenants more time to catch up on overdue rent before a landlord can take steps to evict them.
Normally, the law says that a commercial landlord must give a tenant at least 10 working days’ notice before cancelling a lease because of overdue rent.
Under the changes, the notice period is extended from 10 working days to 30 working days. This means commercial tenants have more time to catch up with rent payments before the tenant can be evicted. If the tenant is not able to catch up, the tenant has more time to approach the landlord to negotiate temporary changes to the rent or lease agreement to help the tenant get by until it can resume operating as usual.
What about the landlord’s mortgage repayments?
If commercial tenants are having difficulty paying rent, that may make it difficult for landlords to keep up with their mortgage payments. The law changes also give borrowers (including landlords) more time to catch up on overdue mortgage payments before a lender can take steps to enforce the mortgage.
The current law says that lenders must give 20 working days’ notice before they use their powers to take possession of, or sell, the mortgaged property. The temporary law changes extend that period to 40 working days.
This change will apply to all mortgages, including residential and commercial, and regardless of whether the mortgaged property is tenanted. However, we anticipate that mortgage holidays are likely to be the first port of call for residential borrowers.
These temporary law changes mean that, like commercial tenants, borrowers have a better chance to get through the COVID-19 situation and temporary financial hardship. They still have the same payment obligations but have more time to remedy breaches or defaults.
What are the rules for mortgaged goods other than real property?
The law changes also extend the notice timeframes in the case of mortgaged goods owned by a business. This could be a mortgaged fleet of vehicles.
For these types of mortgages, the timeframes are temporarily changed from 10 to 30 working days before the lender can take enforcement action.