The Government has introduced the Commercial Rent (Coronavirus) Bill which, when it becomes law, will establish a binding arbitration process for commercial rent arrears which have accrued during the pandemic. Following our recent article on the proposals, James Holton, discusses the latest developments.
What has been announced?
The aim of the measures is to allow landlords and tenants to resolve the significant level of pandemic rent arrears and to help the market return to normal as quickly as possible. The new measures include the :
- Commercial tenants are protected from eviction on the ground of rent arrears until 25 March 2022.
- A new Code of Practice has taken immediate effect which provides landlords and tenants with a clear process to follow where rent is in arrears as a result of the pandemic.
- The Code recommends that tenants who are unable to pay their rent in full should negotiate with their landlord.
- Where it is not possible for the parties to reach an agreement, either of them can refer the matter to arbitration which will result in a legally binding agreement as to the arrears to be paid.
- The Bill will apply to commercial rent debts related to the mandated closure of certain businesses during the pandemic. The types of businesses include those such as gyms, restaurants and pubs.
- Landlords will be barred from making new claims for rent arrears which accrued during a protected period (21 March 2020 to 18 July 2021 in England and 21 March 2020 to 7 August 2021 in Wales). This will include a counterclaim.
- “Rent” will include service charges, interest and VAT.
- If judgment is given on rent arrears between 10 November 2020 and the date the Act is passed, the arrears can still be referred to arbitration.
What Can Landlords Do?
Many landlords have experienced tenants failing to pay rent whilst trading successfully during the pandemic.
Landlords will be encouraged by the opportunity to obtain payment of arrears from those businesses which remained open during the relevant periods as well. Similarly, many landlords will welcome the opportunity to resolve matters constructively with those tenants who were unable to trade.
We recommend early engagement between landlords and tenants to resolve any rent arrears which accrued both during and after lockdowns. Arbitration will be an option although this will usually be a last resort due to the cost of such a referral.
With early intervention, a strategy can be successfully implemented be this to maintain the landlord and tenant relationship or to recover possession, should there be breaches of tenant’s obligations other than rent arrears.
DTM Legal LLP
Our specialist landlord and tenant team are supporting clients and their professional advisors in the successful management of their portfolios including the recovery of rent and service charge arrears, plus the renewal and termination of leases.
James Holton is named as a “rising star” in the Legal 500 and is a landlord and tenant specialist. To contact James please email him at james.holton@dtmlegal.com
