Clause 13 Arbitration awards available Question proposed, That the
clause stand part of the Bill. The Parliamentary Under-Secretary of
State for Business, Energy and Industrial Strategy (Paul Scully) As
usual, Mr Hosie, it is a pleasure to serve under your chairmanship.
The clause sets out what awards an arbitrator may make following a
reference to arbitration. It provides clarity to arbitrators and
parties considering arbitration about the criteria for...Request free trial
Clause 13
Arbitration awards available
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Business, Energy
and Industrial Strategy ()
As usual, Mr Hosie, it is a pleasure to serve under your
chairmanship.
The clause sets out what awards an arbitrator may make following
a reference to arbitration. It provides clarity to arbitrators
and parties considering arbitration about the criteria for
successful referral.
(Feltham and Heston)
(Lab/Co-op)
It is pleasure to serve under your chairship, Mr Hosie.
Subsection (3) requires an arbitrator to dismiss a reference if
they find that the tenant’s business “is not viable” and
“would not be viable even if the tenant were to be given relief
from payment”.
Will the Minister say more about what constitute viable and
unviable businesses? Groups representing the hospitality sector,
for example, have made it clear that the seasonal nature of their
businesses should be reflected in the viability test. As well as
being provided with guidance, arbitrators should also have the
right level of flexibility.
I am happy to give the hon. Lady that assurance. The reason why
we do not have a specific definition of what constitutes
viability or affordability is that businesses models vary
greatly, including with seasonality, and within and between
sectors. Under clause 16, which we will consider later, we
include factors that the arbitrator should consider when
assessing the viability of the tenant’s business.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14
Arbitrator’s award on the matter of relief from payment
Question proposed, That the clause stand part of the Bill.
The Bill contains principles that are key to ensuring that rent
debt is resolved in a proportionate way for tenants and
landlords. The clause sets out how arbitrators must consider
those principles when making an award under the Bill.
I have a couple of questions about the clause. First, will the
Minister clarify why the Government have chosen to make the
repayment time under subsection (7) 24 months? Has he concluded
that that will be sufficient time for businesses to repay what
they owe, even if further covid restrictions are put in place?
The current circumstances are a cause for concern to businesses
that have seen revenues drop while costs continue. Secondly,
reflecting the concerns of stakeholders including the Pubs
Advisory Service, will the Minister clarify whether subsection
(2) implies that the arbitrator will consider only the final
proposal when making the award, or will they consider all
proposals made by both parties in the round?
In awards that give tenants time to repay the debt, tenants will
have no longer than 24 months to do so. That recognises that
additional time to repay may help businesses to recover and start
to trade as normal, while ensuring that the issue of rent debts
does not drag on unnecessarily. As for how it works, the scheme
uses a key aspect of pension arbitration, by which each may
propose a financial solution to pay protected rent, and the
arbitrator will select the proposal that is most consistent with
the principles set out in the Bill, assuming that one at least
follows those principles. Otherwise, the arbitrator must make
whatever award the arbitrator considers appropriate when applying
the principles.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Arbitrator’s principles
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 1—Review of
awards—
“(1) The Secretary of State must no later than three months
following the day on which this Act is passed conduct a review to
assess whether sections 15 and 16 of this Act have been
interpreted consistently by approved arbitration bodies.
(2) In conducting a review under subsection (1), the Secretary of
State shall have regard to published awards.
(3) If a review under subsection (1) identifies material
inconsistencies in the interpretation of sections 15 and 16 of
this Act, the Secretary of State must issue further guidance or
amend existing current guidance to arbitrators about the exercise
of their functions under the Act.”
This new clause would require the Secretary of State to conduct a
review of awards to assess whether sections 15 and 16 of the Act
have been interpreted consistently and publish or amend guidance
as necessary.
New clause 1 is a probing amendment. It would require the
Secretary of State to conduct a review of awards to assess
whether sections 15 and 16 of the Act have been interpreted
consistently and to publish or amend guidance as necessary. We
have heard issues raised about the interpretation of viability of
businesses and making sure there is enough experience with
arbitrators to ensure a consistent approach to resolving rent
debt. In tabling the new clause we are seeking a review. It is
helpful to know if the Secretary of State is seeking feedback on
how the system is working and whether there are inconsistencies
identified, which may require further guidance to be given to
arbitrators about the exercise of their functions under the Bill.
That is in the interest of strengthening the regime and trust in
it among tenants and landlords alike. I would be grateful for the
Minister’s comments on what feedback process he is expecting to
see otherwise, so that we can make sure there is learning through
the system and that it works effectively.
We are committed to the principles in the Bill. That is why we
have included them in the legislation. We will require
arbitrators to follow them in their work. Arbitration bodies will
only appoint arbitrators that are considered suitable to carry
out arbitration as set out in the Bill. These bodies also have
the power to oversee any arbitration when an arbitrator is
appointed.
The arbitration system is designed to be a quick, effective and
impartial solution to rent debts that cannot otherwise be
resolved. Requiring a review of the arbitration process within
three months of the Bill being in force could slow that process
down. It may add additional steps and requirements for
arbitrators who have already proven their suitability and
impartiality for the role. It may postpone the appointment of
arbitrators, further delaying cases if arbitration bodies must
await the findings of the review before acting.
If new or revised guidance were required following a review, it
would take additional time to produce and would not be in place
for many cases referred to arbitration. We currently expect that
all applications to arbitration would be made within six months
and that cases should be resolved as soon as practicable
afterward. Under the Bill’s provisions, the Secretary of State
can also request a report from approved arbitration bodies
covering the exercise of their functions under the Bill,
including details on awards made and the application of the
principles set out in the Bill on arbitrations they oversee.
There is a requirement for arbitrators to publish details of
awards made, including the reasons behind it. That will show how
arbitrators have applied the principles in the Bill to come to
their decision. If there is any need to revise the guidance, for
example to clarify or add new information for arbitrators, the
Secretary of State is already able to do so. In summary, the Bill
already contains several ways of monitoring the application of
its principles. If the need arises, guidance can be updated to
ensure that arbitrators have the information required to carry
out their work. I do not believe that a required review would
benefit the aims of the Bill. Therefore, I hope the hon. Member
will withdraw her new clause.
On the basis that there are other mechanisms that the Minister
will—I use the word will—be using to ensure that there is
feedback from the system, we will not push the new clause to a
vote today. However, I do think it will be important to keep this
under review. I expect that on Report in the new year, when
circumstances might be different, we may want to look again at
some of these amendments.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16
Arbitrator: assessment of “viability” and “solvency”
Question proposed, That the clause stand part of the Bill.
The clause is important because it relates to the key principles
of viability and solvency that underpin the arbitration process.
Arbitrators must ensure that an award maintains or restores a
business’s viability as long as it is considered that it would be
preserving a landlord’s solvency.
Subsection (2) lists factors to which an arbitrator may have to
have regard when assessing landlord solvency, so far as the
information is known. Could the Minister confirm whether further
details about this evidence will be released by the Government?
Again, I am just asking about consistency in the arbitration
process.
Subsection 3 states that the arbitrator must disregard the
possibility of either party borrowing money or restructuring
their business. We support this measure and think it will
contribute to ensuring that the arbitration process is fair.
However, if would be helpful to hear some clarification on the
regulations outlined in clause 16, and what further guidance will
be forthcoming.
I have talked about the fact that in this clause there are a
number of factors when assessing the viability of a tenant’s
business. I would also point the hon. Lady to the code of
practice, which is not only for the use of the arbitrator, but
for people who fall outside the scope of the Bill. It contains a
non-exhaustive list of evidence that can be considered when
determining viability and affordability, including existing and
anticipated credit debt balance; business performance since March
2020; the tenant’s assets, some of which may be liquid, others of
which may be plants or machinery; the position of the tenant with
other tenancies; insolvency of a major customer; unexpected
retentions or knowledge of a lack of working capital; or loss of
key personnel or staff redundancies. Further factors can be found
in annex B of the code of practice.
Question put and agreed to.
Clause 16 accordingly ordered to stand part of the Bill.
Clause 17
Timing of arbitrator’s award
Question proposed, That the clause stand part of the Bill.
The clause establishes the timeframe for making awards, requiring
arbitrators to make an award as soon practicable or, in the case
of a normal hearing, within 14 days.
We recognise that both businesses and landlords will benefit from
prompt solutions to rent debt. Can the Minister explain why a
different time frame is appropriate for the making of the award
depending on whether an oral hearing is held or not? It would
also be helpful if he could explain what
“as soon as reasonably practicable”
means in this context. What would be a reasonable period of time
for the award to be made?
Stakeholders have suggested to us that under the pubs code,
awards and adjudications can take up to a year to be published.
Presumably the Minister can confirm that this would certainly not
be reasonable. He has talked in general terms about time limits
before, but given that there is no stipulated time limit under
clause 17(1), what recourse would the parties have where no award
is forthcoming in a timely manner?
Although the applicant making a reference to arbitration must
submit a formal proposal, there is the option for the respondent
to also submit a formal proposal. Both parties also have the
option to submit revised proposals. In addition, some cases may
be more complex than others, and the arbitrator may need to ask
for further information. The Bill therefore provides that the
arbitrator must make the award as soon as reasonably practicable,
which will allow for any additional work required because of the
complexity of the case. I assure the hon. Lady that we are indeed
hoping and expecting such cases to be resolved within a matter of
months rather than, as she described in relation to the pubs
code, anywhere approaching a year.
When there is a long period, there is a clear date on which the
hearing concludes and evidence has been given, so that is why the
Bill provides that the arbitrator has 14 days from the day on
which the hearing concludes to issue such an award. Some cases
that go to oral hearings may have added complexities, so the
arbitrator may need more than 14 days to consider arguments,
facts and evidence that have arisen. There is a discretion there
for the arbitrator to extend the time limit if they consider that
it would be reasonable, in all circumstances.
(Birkenhead) (Lab)
Will there will be any retrospective payments? In the bundle of
evidence some companies submitted, they say that they have been
pressed for their outstanding debt. If this Bill goes through,
does that mean that any retrospective payments will be made by
the arbitrator?
I will write to the hon. Gentleman if I am getting this wrong,
but I think the arbitrator can take the whole situation into
account, including what has been paid and the evidence that has
been given, when making the final judgment. I will write to the
hon. Gentleman if that is not as full an answer as he wants.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Publication of award
Question proposed, That the clause stand part of the Bill.
The arbitrators will be required to publish awards and the
reasons for making them in the interest of transparency, but they
will also be required to exclude confidential information for
anything published, unless notified by the person to whom the
information relates that they consent to its publication.
Landlords and tenants can ask for confidential information to be
redacted.
We support the clause and the exclusion of confidential or
personal information that may cause harm or concern. Labour
believes that the arbitration process established under the Bill
should be subject to appropriate transparency, with appropriate
safeguards for commercially sensitive or other confidential
information. The publication of awards should also support a
consistent approach being taken across cases heard under the
regime.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Arbitration fees and expenses
I beg to move amendment 4, in
clause 19, page 12, line 6, leave
out “may” and insert “must”.
This amendment would require the Secretary of State to make
regulations specifying limits on arbitration fees.
The Chair
With this it will be convenient to discuss amendment 5, in
clause 19, page 12, line 8, after
“question” insert
“and having regard to the accessibility and affordability of the
arbitration process.”
This amendment would require the Secretary of State to consider
the accessibility and affordability of the arbitration process
when specifying limits on arbitration fees.
I am pleased to move amendment 4, which relates to limits on
arbitration fees, and speak to amendment 5, which relates to the
accessibility and affordability of the process. We recognise that
parties have to meet their legal and other costs, but we believe
that arbitration fees and expenses should be proportionate to the
arrears that are the subject of the dispute, and that they should
not create a significant cost for the parties. I am sure the
Minister recognises the harmful effect that a high arbitration
cost would have on businesses that are already struggling, and it
is only those in very difficult circumstances that are going into
the process in the first place.
Clause 19 gives the Secretary of State the discretion to specify
ceilings for arbitration fees in secondary legislation. We
believe the Secretary of State should make such regulations to
provide a cap, which would be the effect of amendment 4. We have
also tabled amendment 5, which
“would require the Secretary of State to consider the
accessibility and affordability of the arbitration process when
specifying limits on arbitration fees.”
That is to ensure that, when setting new limits, the Secretary of
State explicitly takes into account how the limits will affect
the ability of business tenants and landlords to enter the
arbitration process. I hope the Minister recognises the
importance of ensuring that arbitration is not too costly for
either landlords or tenants, particularly as businesses are again
seeing falls in revenues at this stage. There is a cross-party
desire to tackle rent debt, but we want the arbitration process
to work. For that, businesses must be able to afford to enter the
process.
I would be grateful if the Minister could respond to a concern
raised by a stakeholder about the fees and costs that the
arbitration bodies may apply. I understand that there is a £750
fee associated with a complaint under the rules of certain
arbitration bodies. Would such a cost be included within the cap?
I thank the Minister in advance for his response.
As the clause stands, the Secretary of State will have the
delegated power to make regulations specifying limits on the fees
and expenses of arbitrators, but if the power is exercised,
approved arbitration bodies will still have the discretion to set
fee levels up to the cap limit. We have adopted a market-based
approach that enables arbitration bodies to set fee levels for
themselves, because they are best placed to decide, given their
experience of costing arbitration schemes to make them affordable
for parties and attractive enough for arbitrators to take on
cases. The Secretary of State’s powers are intended to be used
only when circumstances determine that it is appropriate.
We have designed the arbitration scheme to be affordable, and we
are working with arbitrators to agree the cost schedules, which
may answer the hon. Member’s question. Setting fee levels at this
stage would be counterproductive, because we do not know what the
market rate is while discussions are ongoing. A market-based
approach is the optimum way to ensure that, on one hand, there is
enough capacity in the system to deal with the case load and
that, on the other hand, fees are affordable. Hon. Members have
also asked that an express requirement be inserted that would
require the Secretary of State to have regard to the
accessibility and affordability of the arbitration process when
specifying those limits. As I said, affordability is an important
consideration in our discussions. It will be an important factor
that will determine accessibility. We will take it into account
when deciding if and how to exercise this power.
09:45:00
We have tested the cost of similar arbitration schemes currently
on offer in the market, and landlords and tenants have indicated
that it is affordable. We do not want to specify cost limits
unless there is a need to do so. For those reasons, I do not
accept the amendment 4. Amendment 5 is unnecessary. I hope the
hon. Member will not press the amendments.
I thank the Minister for his remarks, but I do not think that
they approach the heart of the debate. I would like to push
amendment 4 to a vote, because this is an important issue.
Question put, That the amendment be made.
Division 1
14/12/2021 00:00:00
The Committee divided:
Ayes: 7
Noes: 10
Question accordingly negatived.
Question proposed, That the clause stand part of the Bill.
Clause 19 concerns the fees and expenses of the arbitrators of
approved arbitration bodies. We want to make sure that we have
capacity and that it is affordable. If the cost does indeed prove
to be a barrier, we can cap the fees to ensure that it remains
affordable.
Notwithstanding the concerns we have just raised, which we will
continue to pursue, we support clause 19.
Question put and agreed to.
Clause 19 accordingly ordered to stand part of the Bill.
Clause 20
Oral hearings
Question proposed, That the clause stand part of the Bill.
Being mindful of European convention on human rights
considerations and the right to a fair trial, it is important
that landlords and tenants have the option of a hearing. Any
hearing would be in public unless the parties agreed otherwise.
An oral hearing would add time and costs to the arbitration
process, and the parties would be responsible for meeting those
costs. This clause is important, as it gives the parties the
right to an oral hearing and establishes the process for doing
so.
Labour generally supports these measures, but it would be helpful
to understand whether the Minister expects oral hearings to be
the exception rather than the rule. As the Chartered Institute of
Arbitrators made clear in evidence about the business arbitration
scheme, there was an assumption against oral hearings, with a
document-only approach, which keeps costs and time low and, as it
would say, allows for a more efficient process. Will guidance set
out when oral hearings might be necessary or appropriate? We
would like to understand more about the cost of oral hearings.
Can the Minister say what he might expect the cost of oral
hearings to be? Would he explain what action the Government will
take to ensure that all hearings are affordable?
I can reassure the hon. Lady that we would expect oral hearings
to be very much the exception, because we want to make sure that
we get through the process for landlords and tenants as quickly
as possible. Under clause 21, the Secretary of State will provide
arbitrators with guidance on the process of the scheme, including
in relation to their function and exercise under the Arbitration
Act 1996, as modified by the Bill.
There are a number of areas, such as what evidence the parties
should provide when attending any oral hearings, where there is a
risk of being too prescriptive, as what is relevant may differ
between cases. Guidance would therefore be more helpful than
strict rules. However, the ability to go for an oral hearing will
very much depend on the arbitrator’s skills and experience, and
will take into consideration the landlord and the tenant—as I
said, they do have a right to a fair trial. The costs would
depend on the complexities of the case.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the
Bill.
Clause 21
Guidance
I beg to move amendment 6, in
clause 21, page 13, line 3, leave
out “may” and insert “must”.
This amendment would require the Secretary of State to publish
guidance on the exercise of arbitrators’ functions and the making
of references to arbitration.
The Chair
With this it will be convenient to discuss amendment 7, in
clause 21, page 13, line 6, at end
insert—
“(1A) Guidance issued under subsection (1)(a) shall provide
further information as to how arbitrators should assess
‘viability’ and over what timescale for the purposes of section
16.”
This amendment would require guidance published under this
section to include information on the interpretation of
“viability”
I will speak briefly to these amendments, which relate to
viability. As we have outlined several times, we are asking how
arbitrators would assess viability, and what skills and
experience they would have to do that. We have tabled these
probing amendments to seek guidance with information on the
interpretation of viability.
There is benefit in having some flexibility, while still
commanding the confidence of both sides, so that judgements can
be made with the information available, but there is also a
question of trust. We need confidence that the definition around
viability will be interpreted consistently across arbitrators and
arbitration bodies. Amendment 7 would reflect the concerns of
stakeholders that guidance must address the meaning of viability
and the timeframe over which it would be assessed.
As the clause stands, the Secretary of State already has a
delegated power to issue guidance. Hon. Members have asked that
amendments be made to place a duty on the Secretary of State to
issue that guidance. As I have explained, it is not necessary to
require the Secretary of State to issue guidance, and it is
neither necessary nor appropriate to be more prescriptive in the
clause is.
Clause 16 already sets out a list of evidence that the arbitrator
must have regard to when assessing viability. We have also set
out a detailed, non-exhaustive list of the types of evidence that
tenants, landlords and arbitrators should consider when assessing
the viability of a tenant’s business, and the impact of any
relief on the protected rent debt on the landlord’s solvency in
annex B of the revised code of practice.
We are in ongoing discussions with arbitration bodies and
landlord and tenant representatives to gauge what further
guidance they need. We want to be informed by those discussions
in deciding whether further guidance is needed and, if so, what
precisely it should contain. If further guidance on viability is
needed, we are prepared to produce it, but that is clearly
covered by the clause as it stands.
It is essential that arbitrators maintain flexibility in
assessing the viability of a tenant’s business, including the
types of evidence required to make those assessments, so that
they can be made in the context of each individual business’s
circumstances. If guidance is too prescriptive, there is a risk
of depriving arbitrators of that necessary flexibility,
potentially resulting in unfair arbitration outcomes.
I thank the Minister for his remarks. That was a very helpful set
of comments, in light of what he has also outlined in relation to
the ongoing discussions, which we are pleased to hear of—indeed,
we have had discussions as well—as that is important.
Looking particularly at the pubs and hospitality sector, and
other businesses with great variation in income, their repayments
may need to happen over a more reasonable period of time. It is
helpful to know that the Minister is considering where there may
be differences between sectors, and recognises a system that
takes into account the circumstances of individual businesses,
because they can differ in how they are affected by slowdowns and
so on.
I thank the Minister for his comments. It is certainly an area
that we will keep under review. We will not press our amendment
to a vote today. I beg to ask leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The clause provides the power for the Secretary of State to issue
statutory guidance to arbitrators or to tenants and
landlords.
We support the clause standing part of the Bill.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clause 22
Modification of Part 1 of the Arbitration Act 1996
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 1 be
the First schedule to the Bill.
The clause introduces schedule 1 to the Bill. Rather than include
a detailed procedure for the arbitration process in the Bill,
part 1 of the Arbitration Act 1996 will apply by virtue of
section 94(1) of that Act. The long-standing arbitration
procedures that are well known to arbitration bodies and
arbitrators will apply to arbitrations under the Bill.
The Minister outlined the clause and how it introduces schedule
1. We support the measures and will vote for the clause and the
schedule to stand part of the Bill.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clause 23
Temporary moratorium on enforcement of protected rent debts
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 8 in schedule 2, page 19, line 3,
at end insert—
“whether against the tenant or a person who has guaranteed the
obligations of the tenant”.
This amendment would clarify that the definition of “debt claims”
includes claims against guarantors.
That schedule 2 be the Second schedule to the Bill.
The clause and schedule 2 cover a temporary moratorium on
enforcement measures.
The difficulties of paying commercial rent during the pandemic
are best addressed through negotiation. The Bill provides a
system to resolve protected rent debt when negotiation has not
worked. It has been designed to consider both parties’
circumstances in the exceptional context of the pandemic. If the
landlords could pursue other enforcement methods in respect of
the respected rent, parties would lose the opportunity to resolve
the debt by mutual arbitration applied by the Bill’s arbitration
system. That is why the clause introduces a temporary moratorium
on enforcement measures detailed in schedule 2.
During the moratorium period, landlords may not make a debt
claim, exercise the right to forfeiture or use the commercial
rent arrears recovery—CRAR—power to seize goods in respect of
unpaid protected rent debt. They may not recover protected rent
debt from the tenancy deposit while the temporary moratorium is
in place. If they have done so beforehand, the tenant cannot be
required to top up the deposit in that period. If the tenant
makes a rent payment without specifying the period it covers, the
payment must be treated as relating to unprotected rents before
protected rents.
Schedule 2 also enables the arbitrator to consider protected
rents under a debt claim issued between the Bill’s introduction
and its coming into force, or a judgment on such a claim. It also
treats rent payments made after the end of the protected period,
when closure or other relevant restrictions are lifted, as for
unprotected rents before protected rents.
I emphasise that the Bill’s moratorium and other remedies are
temporary. We want the market to return to normal swiftly. Under
the clause, the temporary moratorium applies only until
arbitration is concluded or, if neither party applies for
arbitration, until the application period closes. The temporary
moratorium also only prevents access to remedies in relation to
protected rent debt. If the tenant in scope of the Bill has
failed to pay rent attributable to a period before 21 March 2020
or after the protected period ended, the landlord can take action
in respect of that debt. Clause 23 and schedule 2, which the
clause introduces, are important to give viable businesses an
opportunity to resolve protected rent debt by mutual agreement
through the Bill’s scheme.
10:00:00
(Brentford and Isleworth)
(Lab)
I will speak to clause 23 and schedule 2, as well as amendment 8,
which I tabled with my hon. Friend the Member for Feltham and
Heston.
The clause prevents rent debts from being collected during the
moratorium period, which begins on the day the Act is passed. As
we have said previously, we welcome efforts to put a moratorium
on the enforcement of protected rent debts, and the clause
outlines a number of protections to stop landlords collecting
rent arrears debts, including by preventing the making of a debt
claim using commercial rent arrears recovery powers or using a
tenant’s deposit. The measures have been broadly welcomed by
businesses and we support them.
The provisions on the moratorium period cover the period
“beginning with the day on which this Act is passed”.
Last week, Kate Nicholls of UK Hospitality told the Committee
that as soon as the Bill is enacted, communications should go out
to ensure that commercial tenants are aware of the arbitration
process. That point holds for small businesses and independent
businesses. I very much hope that the Government will take steps
to ensure that the Bill and the protections in it come into force
as soon as possible and, equally, that tenants as well as
landlords are aware of the protections.
Schedule 2 sets out in more detail the process by which landlords
are prevented from making a debt claim and ensures that landlords
are unable to take civil proceedings during the moratorium
period. We support those provisions, although we know from the
feedback we heard during the witness sessions last week the
importance of ensuring that tenants are aware of the moratorium
period and of the ability to enter into arbitration. Businesses
absolutely need to be made aware of the measures.
The schedule outlines in further detail the various definitions
used in the Bill, reaffirms that landlords are not able to make a
debt claim against protected debts during the protected period,
and outlines how parties can apply for debt claims to be stayed
while arbitration goes on.
I want to outline the important issues that we raised about the
arbitration process. The process should be fair and transparent,
and it needs to have the widespread confidence and support of
tenants and landlords. As the witnesses in last week’s evidence
sessions said, it is crucial that smaller tenants and landlords
should not be made to suffer as the result of an expensive or
long-running arbitration process in which they are at risk of
being muscled out by the greater power of larger organisations.
We welcome the arbitration process and the relief that it will
bring, but the process itself needs to be fair, and it needs to
ensure a balanced playing field.
Schedule 2 also outlines the fact that a landlord may not use the
commercial rent arrears recovery power for protected debt, which
we welcome. It also seeks to ensure that a landlord is
prevented from enforcing a right to forfeit the tenancy in
relation to the non-payment of rent. Subsection 9 prevents a
landlord from using a tenant’s deposit. We welcome that provision
as part of the wider package of protecting tenants and ensuring
that landlords cannot seek to get around the spirit of the
arbitration process and the protections around arrears.
Amendment 8 seeks to clarify that the definition of debt claims
includes claims against guarantors. It aims to provide extra
clarity about whether the protections given against county court
action are also provided to the guarantors of tenancies. We have
received written testimony from experts in the arbitration field
and from the head lessee of the Subway chain, who express concern
that guarantors and former tenants were not included in the
implications of the legislation. I am sure that the Government
want to see, just as we do, that the protection against rent
arrears action is spread across all the businesses impacted by
covid, as well as those that have given the additional support
that new and small businesses so often need, such as their
guarantors. Of course, many small businesses are franchisees of
chains such as Subway, and its head lessee’s evidence must count
for a lot of organisations where there is a head lessee and a
franchise system.
We do not want to see a back door created whereby tenants are
protected from enforcement but the guarantors are still liable.
We also heard evidence from the guarantor of a nightclub in
Surrey. We have two issues here: the guarantors and the head
lessee. It is crucial that the Government ensure that the
guarantors of tenants are also protected against debt claims
during the prescribed six-month period. We do not want to see the
common-sense measures circumvented if landlords are able to go
after guarantors with no limit. As I say, the amendment is
specifically about guarantors, but we also have concerns on
behalf of head lessees.
I thank the hon. Member for her comments. Indeed, I agree with
her. She said that she wants the Bill to be passed as soon as
possible, so I am speaking as quickly as I can to make sure that
we can get that done.
On the communications, we have already given plenty of notice.
The original announcement was in June. The policy statement and
the code of practice were published. We have hosted webinars with
key stakeholders, and we will continue to engage with them. The
hon. Member is absolutely right. We want to make sure that this
measure is known by all so that they can take advantage of it. If
they are unable to settle their rent debts between themselves, we
can bring this to a head quickly through arbitration and get back
to a normal free market as soon as possible.
On the amendment, I can reassure the hon. Member that we will
take full note of written evidence that comes in, but paragraph 2
of schedule 2 already prevents claims against guarantors. It
prevents the landlord from making any debt claim in respect of
protected rent within the moratorium period specified by the
Bill. The provision in question is not limited to claims against
tenants, so it does not need to state expressly that it covers
claims against guarantors.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 24
Temporary restriction on initiating certain insolvency
arrangements
Question proposed, That the clause stand part of the Bill.
Both parties are expected to engage with the arbitration process
and must comply with any award made. They may choose to settle
the matter by negotiation ahead of arbitration, but other
processes that enable the arbitration system to be avoided should
not be available. That is why clause 24 prevents a party from
proposing or applying for a company or individual voluntary
arrangements or certain other restructuring arrangements with
their creditors.
Just as we welcome the actions in clause 23, we welcome clause 24
placing restrictions on the ability of either a landlord or a
tenant to enter into specific insolvency arrangements when the
matter relates to protected rent debt. That is a welcome move, as
we do not want to see viable companies going into insolvency
because of rent arrears.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Temporary restriction on initiating arbitration proceedings
Question proposed, That the clause stand part of the Bill.
The clause prevents either party from invoking alternative
measures that have not been designed specifically for debts
related to the pandemic.
We heard in testimony last week that the vast majority of
landlords and tenants have been able to reach agreements on rent
arrears, and it has generally been a productive and
straightforward process. The clause ensures that the tenant or
landlord cannot unilaterally start arbitration proceedings and
must go through the referral process, requiring the other party
also to make submissions in writing. I am interested to hear what
steps are in place for businesses, and especially small
businesses, when a larger landlord or tenant refuses to enter
arbitration fairly.
If both parties wish to resolve their unpaid protected rent debt
by an alternative form of arbitration, they may agree to do so.
In terms of the arbitration itself, the businesses—either the
landlord or tenant—can act unilaterally.
Question put and agreed to.
Clause 25 accordingly ordered to stand part of the Bill.
Clause 26
Temporary restriction on winding-up petitions and petitions for
bankruptcy orders
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 3 be
the Third schedule to the Bill.
Clause 26 and schedule 3 temporarily prevent landlords from
petitioning, in relation to protected rent debt, to wind up
businesses in scope of the Bill or petitioning for bankruptcy for
businesses that are individuals, such as sole traders, that would
otherwise be viable. The clause and the schedule support viable
businesses by allowing debts to be resolved by mutual agreement
or by the Bill’s arbitration system, which considers both
parties’ circumstances in the exceptional context of the
pandemic. As with the other temporary restrictions in part 3, the
restrictions detailed in clause 26 and schedule 3 apply only in
relation to protected rent debt.
We welcome the measure in clause 26 as it will prevent landlords
from going through a back-door method of targeting businesses
unfairly. We also support schedule 3 as it will ensure that
viable businesses are protected and can enter into the
much-needed arbitration process. Paragraph 3 of schedule 3
ensures that bankruptcy orders in relation to rent arrears made
before the day on which the Bill becomes law shall have no power.
This will prevent businesses that will be helped by the
legislation from being declared bankrupt, which we support as it
will protect otherwise viable businesses.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 27
Power to apply Act in relation to future periods of coronavirus
control
Question proposed, That the clause stand part of the Bill.
The measures in the Bill are a response to the unprecedented
impacts of the pandemic and will support commercial tenants and
landlords to resolve their rent debt. To ensure that we are
prepared for a future situation of a further wave of coronavirus
giving rise to further business closures, we are including a
power to reapply the provisions in the Bill. This will enable the
Government to reapply any and all provisions in the Bill so that
we can take a targeted approach to respond to the specific
circumstances of any future period of coronavirus.
Given the past few days and the news of business revenues
plummeting, we of course welcome the clause. We know that many
businesses are already feeling the pinch, as we have seen in the
news. There is already worry and concern in the sector about
staff shortages and rising supply costs, and on top of that
businesses are concerned about customer numbers. The Government
appear to rule out any return of covid-related support for
businesses, but at least the clause offers some relief in respect
of rent arrears. Although we welcome the inclusion of a power to
ensure that businesses do not get punished for rent arrears in
the future if they are forced to close, I take this chance to
remind the Government that businesses are feeling the pinch, even
if they have got over the outstanding revenue losses from the
previous almost two years. We know that customers are cautious in
the face of the new variant, and that businesses will be
impacted, so we support the clause.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Power to make corresponding provision in Northern Ireland
Question proposed, That the clause stand part of the Bill.
The Bill will not apply directly to Northern Ireland. Instead,
this enabling power was requested by the Northern Ireland
Executive. It is intended to allow them to introduce the measures
in the Bill at their discretion. The arbitration scheme remains
an option for Northern Ireland while they assess their need for
those measures. We will of course continue to work closely with
our counterparts in the Northern Ireland Executive.
We welcome clause 28, but our comments and concerns about
businesses in England and Wales apply just as much to those in
Northern Ireland.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clause 29
Crown application
Question proposed, That the clause stand part of the Bill.
The Bill will bind the Crown where the Crown is a landlord under
the business tenancies in scope of the Bill. I commend clause 29
to the Committee.
Clause 29 is a straightforward clause, setting out that the Bill
binds the Crown. We have nothing further to add.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30
Extent, commencement and short title
Question proposed, That the clause stand part of the Bill.
This clause sets out the territorial extent of the Bill, which
has been carefully considered, and the continued engagement of
the devolved Administrations. It reflects the differing needs of
each part of the UK and ensures that the tenants and landlords
that will most benefit from this measure can access it. It
extends to England and Wales, with limited provisions extending
to Northern Ireland and Scotland.
We have nothing further to add on clause 30, Mr Hosie. However,
this is the last time that we will speak in this Committee, so I
will take the opportunity to thank all those who have provided
expert submissions to the Committee, who have spoken in the last
week and who have sent written submissions. I thank Members for
their attendance, and I thank the staff who have administered the
Bill so smoothly and enabled us to finish so quickly.
I conclude with an overarching point. Some of the submissions
that we have received, particularly this week, from expert bodies
with significant legal and other professional expertise in the
area of landlord and tenant law, arbitration and settlements
still express significant concerns about the detail of the way
the Bill is drafted. I hope that between now and Report and Third
Reading, the Government will look at their comments, meet them
and address some of the detailed and expert points that they
raise. I fear that they probably know what they are talking
about.
I echo the hon. Lady’s thanks to you, Mr Hosie, to the Clerks and
to everybody for making this happen. We want to ensure that we
get the Bill into legislation as quickly as possible, but that
does not mean that we will rush it and not have further
consideration. Beyond the passage of the legislation through
Parliament, we will continue to engage with stakeholders,
including arbitration services, landlords and tenants, to ensure
that we get it right. It is so important that we get this enacted
now, so that landlords and tenants can get the benefits when they
need them—now, not when it is too late.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Bill to be reported, without amendment.
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