A Guide to the Commercial Rent (Coronavirus) Bill

Your comprehensive guide to the Commercial Rent (Coronavirus) Bill and how it impacts you as either a Commercial Tenant or a Commercial Landlord

On Friday 25th March, the measures put in place to protect commercial tenants during the pandemic will be replaced by the new Commercial Rent (Coronavirus) Bill, as Commercial Landlords now seek to reclaim the £8.5 billion of rent arrears accrued during the Coronavirus pandemic. 

The Bill is being introduced in order to resolve disputes between commercial landlords and tenants relating to the non-payment of rent payments which fell due during the pandemic and periods of lockdown. This will be known as the ‘Protected Period’. In England, the protected period commenced on 21 March 2020, lasting until 18 July 2021, including the last day on which the tenant’s business was subject to restrictions. It should be noted that any other rent which falls outside of the Protected Period cannot be subject to the arbitration scheme and landlords can use the pre-covid remedies in order to recover the rent.

 

Can Landlords use other enforcement methods to recover rent arrears? 

Strictly speaking the floodgates to pre-covid remedies will not immediately re-open to all businesses affected, the Bill looks to implement a mandatory arbitration scheme which both commercial landlords and tenants will be bound by, if either party apply or make a referral to the scheme in the absence of the parties reaching an agreement in respect of the rent arrears. 

It should be noted that the arbitration scheme will look to ‘ring-fence’ rent arrears which accrued during periods of forced closure only. It should also be noted that the definition of Rent is also to extend to service charges, insurance rent, interest (on late payments) and the topping up of rent deposits. 

 

What will the Arbitration Scheme entail? 

It is yet to be seen how seamless the process will be but it will be split into different stages:

  1. Firstly, a letter of notification by either party including a proposal for settlement of the rent arrears will need to be issued;
  2. The responding party will then have the opportunity to accept or respond with a counterproposal. In the absence of an agreement then a referral to arbitration can then be made; 
  3. The responding party has 14 days to respond to the referral and both parties should include evidence where possible;
  4. The matter will then proceed to go before an arbitrator;
  5. Both Landlord and tenant will then be notified of the award made within 14 days of the hearing and the award made by the arbitrator will be legally binding.

 

What will the Arbitrator consider?

It is important that evidence is filed with the proposals so that the arbitrator is able to assess the proposal in light of the evidence before it.

The arbitrator will look at the tenant’s affordability together with whether the tenant operates a viable business. If the arbitrator is of the view that the tenant’s business is not viable then it can decline to engage in the process. 

 

What will happen to existing court proceedings? 

Debt recovery proceedings was the only route to recovering rent arrears during the life of the Coronavirus Act 2020. It is therefore likely that there are currently a significant number of live court proceedings awaiting trial. 

If the landlord issued Court proceedings before 10 November 2021 then they are still entitled to continue with those proceedings. However, if the landlord issued proceedings on or after 10 November 2021 (when the Bill was announced), the tenant would then have the right to ensure that proceedings are stayed, pending arbitration. This ensures that any landlords who issued proceedings directly in response to the announcement of the Bill will not be able to circumvent the purpose and intentions of the Bill.

Similarly, the arbitration will not interfere or re-open negotiations with any pre-existing agreements already made between landlord and tenants in respect of the commercial rent arrears. 

 

Will time be of the essence?

In short, yes. Landlords or tenants who wish to use the scheme only have a six month time period in which to make a referral to the Scheme from when the Bill is enacted on Friday 25th. Any tenants who fail to apply within that time limit will have no further protection. 

 

How can Talbots Law help you?

Contact our specialist solicitor, Josh Millichamp for further information or advice on commercial rent arrears in light of the Commercial Rent (Coronavirus) Bill. You can either click here to email Josh or call 0800 118 1500