- New law comes into effect to provide a legally binding
arbitration process to resolve certain outstanding commercial
rent debts related to the pandemic
- commercial landlords and tenants encouraged to negotiate
agreements using the Code of Practice
- if they cannot agree, the new binding arbitration system can
be used as a last resort for eligible businesses
- general moratorium on commercial evictions ends today
A new law is now in place to help resolve certain remaining
commercial rent debts accrued because of the pandemic, Business
Minister has announced today (Thursday
24 March).
The ‘Commercial Rent (Coronavirus) Act 2022’ received Royal
Assent today. This means that from today a legally binding
arbitration process will be available for eligible commercial
landlords and tenants who have not already reached an agreement.
This will resolve disputes about certain pandemic-related rent
debt and help the market return to normal as quickly as possible.
The law applies to commercial rent debts of businesses including
pubs, gyms and restaurants which were mandated to close, in full
or in part, from March 2020 until the date restrictions ended for
their sector. Debts accrued at other times will not be in scope.
The law comes into force today in England and Wales.
Business Minister said:
This new law will give commercial tenants and landlords the
ability to draw a line under the uncertainty caused by the
pandemic so they can plan ahead and return to normality.
Landlords and tenants should keep working together to reach their
own agreements where possible using our Code of Practice to help
them, and we’ve made arbitration available as a last resort.
Tenants who can repay their rent debts in full, should do so, and
when they cannot, landlords should try to share the burden, so we
can all move on.
The government encourages commercial landlords and tenants to
negotiate their own agreement where possible, so that an
arrangement to resolve debt is mutually agreed, instead of
resorting to the arbitration process.
Today is the last day of the general moratorium on commercial
evictions and restrictions on Commercial Rent Arrears Recovery
(CRAR) in
England and Wales, but eligible firms remain protected for the
next 6 months during which arbitration can be applied for or
until the conclusion of an arbitration.
The moratorium has provided firms with breathing space to
negotiate how to address the cost of commercial rent debts caused
by the pandemic before the new law came into place.
Last year, the government published an updated Code of Practice to
provide commercial landlords and tenants with a clear process for
settling outstanding debts. The Code sets out that tenants who
can pay their rent debt in full should do so, and that in the
first instance, tenants unable to pay in full should negotiate
with their landlord in the expectation that the landlord shares
the burden where they are able to do so, and only as far as
necessary, by waiving some or all rent arrears or giving time to
pay.
More information
The Code of Practice applies across the UK. The ‘Commercial Rent
(Coronavirus) Act’ applies to England and Wales. Scotland has
adopted an alternative approach to commercial evictions since the
start of the pandemic, due to different property legislation and
market conditions.
For those tenancies that fall within scope of the Act and have
failed to reach agreement, either party can apply for arbitration
unilaterally, as a backstop after negotiations have failed.
Parties are free to continue to negotiate outside of the legal
arbitration process. The Code signposts tenants and landlords to
forms of alternative dispute resolution, such as mediation, if
they wish to pursue this.
The window to apply for arbitration will be six months from the
date legislation comes into force. Arbitrators may award a
reduction of protected rent debt and/or time to pay, with a
maximum period to repay of 24 months.
The legal arbitration process will be delivered by arbitrators
appointed by approved arbitration bodies from a list of suitable
and available arbitrators.
Arbitration bodies will have to go through an approval process to
demonstrate their suitability to administer the
scheme. BEIS will
publish a list of approved arbitration bodies in due course, and
where a dispute is eligible, landlords or tenants will be able to
apply directly to any approved arbitration body to appoint an
arbitrator.
BEIS
and DLUHC
will also issue further guidance to landlords and tenants as well
as to arbitrators on how the process will work for all parties.
