Lawbite: The Government approach to commercial rent arrears – further details released

• United Kingdom

• Litigation and dispute management
• Real estate
• Real estate dispute resolution

09-11-2021

Government press release of 9 November - New laws and code to resolve remaining COVID-19 commercial rent debts

The Government have today issued a press release entitled “New laws and code to resolve remaining COVID-19 commercial rent debts” which offers more information on its proposed scheme to address disputes in relation to commercial rent arrears accrued during the pandemic.

Key points to highlight are as follows:

• the Commercial Rent (Coronavirus) Bill is being introduced in Parliament today,
• a new Code of Practice will be published today with the aim of offering guidance to landlords and tenants in their negotiation in relation to the rent arrears
• from today, the government is also apparently protecting commercial tenants from debt claims, including County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions, issued against them in relation to rent arrears accrued during the pandemic

Further detail was also offered as to how the proposed mandatory arbitration scheme will work in practice.  Key points are that:

• the arbitration process will result in a legally-binding agreement the landlord and tenant must adhere to
• the process will apply to businesses 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
• where a tenancy falls within the scope of the Bill either party can apply for arbitration unilaterally up to 6 months from the date that the legislation comes into force (expected 25 March 2022) with a maximum time to repay of 24 months
• settlement by agreement is encouraged and parties are free to continue to negotiate outside of the legal arbitration process once it comes into force
• tenants capable of paying should do so
• the arbitration process will be delivered by private arbitrators in accordance with guidelines set out in the legislation, and they will have to go through an approval process to demonstrate their impartiality and competency to supply dispute resolution services. BEIS will publish a list of approved bodies in due course, and landlords and tenants within scope will be able to apply directly to any approved arbitration body for their dispute resolution if negotiations have failed
• where a CCJ has been issued, this can be considered within the legal arbitration process when this comes into effect.

A further briefing will follow once the Bill and Code have been made available and also once the Government’s method for protecting commercial tenants from debt claims becomes clearer.

Key points

• the real estate sector will welcome a move to certainty in respect of the £7 billion pandemic rent arrears question
• practitioners will be closely following the draft legislation as it works its way through parliament
• insurers will also be keeping a careful eye on any impact it may have upon loss of rent policies held by landlords
• the government are keen to repeat that tenants capable of paying should do so – with the legislation on its way perhaps it will have the effect of encouraging the resolution of some pandemic arrears claims