Commercial Rent (Coronavirus) Bill announced
The government has published a press release announcing the next stage of its moratorium on commercial evictions due to rent arrears: the Commercial Rent (Coronavirus) Bill, which was introduced to Parliament on 9 November.
Commercial landlords have been barred from evicting tenants unable to pay their rent since April 2020, as part of government action to preserve as many businesses as possible amid widespread business closures during lockdown. They have also been unable to resort to the Commercial Rent Arrears Recovery (CRAR) process, unless more than 554 days’ rent is owed, or to present winding up petitions to tenants due to unpaid rent in most circumstances.
New legislation to settle remaining rent arrears disputes
The legislation, although of course dependent on its journey through Parliament, is set to come into force on 25 March 2022 in England and Wales – the date on which the moratorium on commercial evictions is due to end. It will establish a legally binding arbitration process for landlords and tenants who have been unable to settle rent arrears disputes by negotiation, which will be carried out by a list of government-approved private arbitrators (to be published in due course by the Department for Business, Energy and Industrial Strategy). Landlords and/or their tenants will be able to apply for arbitration up to six months following the introduction of the legislation, and the maximum period for repayment of arrears will be 24 months.
The legislation will be underpinned by a new Code of Practice, replacing the original ‘Code of Practice for commercial rent relationships’ first published in June 2020 and updated in April 2021.
Only applicable to ‘ringfenced’ debt
It appears that only “certain businesses” will be eligible for the arbitration process. For example, the government’s press release refers to businesses such as pubs, gyms and restaurants; it is as yet unclear whether businesses outside of the retail, hospitality and leisure sectors will be included.
The arbitration process will also only apply to debts accrued in the periods after March 2020 during which the business was mandated to close – i.e., ‘ringfenced’ debt.
Code of Practice encourages collaboration
The newly published Code of Practice outlines the arbitration process in more depth; even so, it makes it clear that the arbitration process should be viewed as a last resort, with emphasis still firmly on collaboration between landlords and their tenants. In its press release, the government says: “The Code sets out that, in the first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord waives some or all rent arrears where they are able to do so.”
Business Secretary Kwasi Kwarteng also commented: “We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”
Tenants protected from debt claims
Also announced in the press release were new protections for tenants against debt claims, including County Court Judgements, High Court Judgements and bankruptcy petitions. This came into force on 10 November, although it is as yet unclear whether these protections will be retrospectively applied when the new legislation is enacted, or whether this is the result of a secondary piece of legislation that came into force on 10 November.
Helping clients avoid arbitration
Whether you are a landlord or tenant, the arbitration process can be a lengthy and stressful one. At Attwaters Jameson Hill, we always strive to achieve the best outcomes for clients without resorting to litigation. If arbitration is unavoidable, we’re on hand to support businesses through the process as smoothly as possible, allowing them to move on with their recovery. To get in touch, please email our Dispute Resolution Solicitor, Prabhi Ghura, at firstname.lastname@example.org or call 0203 871 0017.