Agenda item

Commercial Property Rent

This report seeks approval to formalise the process for determining rent deferrals.

Decision:

Cabinet RESOLVED:

 

(1)      To formalise the application process for full or partial rent deferrals or rent negotiation through an online form.  The online form would ensure that tenants provide the necessary evidence to support their application and allow the Council to verify the claim and assess the liquidity and solvency of the business i.e. identify those tenants who were experiencing cash flow issues now but who would likely be in a better position to meet their rental costs in the future.  The government was clear that where businesses could pay their rent, they should do so.

 

(2)     That a Panel consisting of officers from Property, Finance and Debt Collection departments be authorised to review each case and make recommendations to the Finance Director and the Strategic Director of Regeneration and Environment in accordance with the broad criteria below:

 

        Temporary illiquidity of the tenant is a direct consequence of the pandemic;

        The business is considered to be a micro business or SME;

        The premises has been closed due to the pandemic, it cannot trade or has suffered a significant reduction in trade;

        Evidence of illiquidity in the form of cash flow statement, statement of means or financial accounts;

        Where the tenant is letting multiple premises from various landlords, the Council acts consistently with those other landlords;

        There is a good prospect of the tenant’s business recovering.

 

(3)     That delegated authority be granted to the Finance Director, in consultation with the Strategic Director of Regeneration and Environment, to make full or partial rent deferral and rent negotiation decisions (in exceptional cases this may include lease re-gearing) on commercial tenancies to effect the most appropriate commercial property solution on a case-by-case basis.

 

(4)     Where businesses have arrears and do not engage in the process for applications for rent deferrals, or do not conform to the agreement made as part of that process, that the Council use the full legal powers to recover rent now and in the future.  This would include:

 

i.        Use commercial rent arrears recovery, where allowed by statute (for example, where Brent is owed 276 days or more of unpaid rent);

ii.       Adding interest where tenants have not agreed rent deferrals with the Council (this is generally a standard lease provision);

iii.      Threat of forfeiture of the lease once the moratorium on forfeiture of commercial leases for non-payment of rent is lifted.

 

(5)     To agree that the above measures provide an incentive for tenants to either pay their rent or formally agree an arrangement with the Council.

Minutes:

The Lead Member for Regeneration, Property and Planning, Councillor Tatler introduced the report which sought approval to formalise the application process for commercial property rent deferrals. Cabinet noted that the impact of the coronavirus pandemic had highlighted the need to formalise the process, whilst still dealing with applications on a case by case basis and in a consistent and transparent way, helping the Council to act as a responsible landlord in supporting its commercial tenants.

 

In considering the recommendations of the report Cabinet noted the information presented in the exempt appendices

 

RESOLVED that Cabinet:

 

(1)      formalise the application process for full or partial rent deferrals or rent negotiation through an online form.  The online form would ensure that tenants provide the necessary evidence to support their application and allow the Council to verify the claim and assess the liquidity and solvency of the business i.e. identify those tenants who were experiencing cash flow issues now but who would likely be in a better position to meet their rental costs in the future.  The government was clear that where businesses could pay their rent, they should do so.

 

(2)     authorise a Panel consisting of officers from Property, Finance and Debt Collection departments to review each case and make recommendations to the Finance Director and the Strategic Director of Regeneration and Environment in accordance with the broad criteria below:

 

        Temporary illiquidity of the tenant is a direct consequence of the pandemic;

        The business is considered to be a micro business or SME;

        The premises has been closed due to the pandemic, it cannot trade or has suffered a significant reduction in trade;

        Evidence of illiquidity in the form of cash flow statement, statement of means or financial accounts;

        Where the tenant is letting multiple premises from various landlords, the Council acts consistently with those other landlords;

        There is a good prospect of the tenant’s business recovering.

 

(3)     delegate authority to the Finance Director, in consultation with the Strategic Director of Regeneration and Environment, to make full or partial rent deferral and rent negotiation decisions (in exceptional cases this may include lease re-gearing) on commercial tenancies to effect the most appropriate commercial property solution on a case-by-case basis.

 

(4)     Where businesses have arrears and do not engage in the process for applications for rent deferrals, or do not conform to the agreement made as part of that process, that the Council use the full legal powers to recover rent now and in the future.  This would include:

 

i.        Use of commercial rent arrears recovery, where allowed by statute (for example, where Brent is owed 276 days or more of unpaid rent);

ii.       Adding interest where tenants have not agreed rent deferrals with the Council (this is generally a standard lease provision);

iii.      Threat of forfeiture of the lease once the moratorium on forfeiture of commercial leases for non-payment of rent is lifted.

 

(5)     agree that the above measures provide an incentive for tenants to either pay their rent or formally agree an arrangement with the Council.

 

Supporting documents: