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The Commercial Rent (Coronavirus) Bill has today (25th March 2022) come into law, introduced by the Government to resolve disputes between commercial landlords and tenants relating to the payment of Covid-19 rent arrear payments in England and Wales.
The Bill allows for the ring-fencing of rent arrears accrued by certain businesses -such as cafes, pubs, hotels, restaurants, and gyms - who were legally forced to close. The definition of rent includes service charges, late payment interest, insurance rent, and the requirement to top-up rent deposits where the landlord has drawn down on these to cover rent debts accrued during the ‘protected period’
A ‘protected period’ refers to the period during which the tenant’s business was subject to restrictions as a result of coronavirus regulations. In England, the protected period commenced on 21 March 2020 and the Code contains a useful table which can be used to work out the last day of the protected period depending on the relevant sector:
Business sector Relevant end date (England)
Hospitality & Nightclubs 18 July 2021
Non-essential Retail 12 April 2021
Garden Centres 13 May 2020
Personal Care 18 July 2021
Hairdressers 18 July 2021
Hotels & B&Bs 18 July 2021
Self-contained Tourist Accommodation 12 April 2021
Indoor Leisure 18 July 2021
Outdoor Sports/Leisure 29 March 2021
Theatres & Cinemas 18 July 2021
Large Events Venues 18 July 2021
Samantha Jones, an Associate Director of Prop-Search; Said: “The rollout of the legislation coincides with the ending of the moratorium protecting commercial tenants from eviction, permitting landlords to forfeit commercial leases for non-payment of rent arrears that are not ring-fenced under the new Bill.”
“The Bill will enable landlords and tenants to apply to an arbitrator to resolve any disputes regarding the ring-fenced rent debts. It is supported by a new Code of Practice which offers guidance on how parties should resolve Covid-19 rent disputes. Binding arbitration is to only be carried out in cases where landlords and tenants are not able to come to an agreement.”
The Bill and Code will apply to commercial rent debts related to the mandatory closure of businesses during the pandemic. However, debts accrued at other times - outside of the ‘protected period’ - will not be included. The Bill will also not apply to tenants who voluntarily chose to close during that period.
Landlord and tenants are not obliged to negotiate rent arrears under the new scheme, however, if an agreement cannot be reached, either party can apply for the matter to be referred to the binding arbitration scheme.
Firstly, a letter of notification by either party including a proposal for settlement of the rent arrears in line with the new Code should be made. The other party will then have the opportunity to accept or respond with a counterproposal. If this does not result in an agreement, an application for arbitration can be made.
The Government’s impact assessment estimates that some 7,500 cases are likely to arbitration and that some 1,200 arbitrators will be required to facilitate this. Applications to become an arbitrators closed during February this year.
Samantha Jones concludes: “When deciding what award to make, the arbitrator will assess the proposal and evidence submitted by both parties in accordance with the principles, viability, and affordability set out within the new Code. For example, if the arbitrator considers one of the proposals to be in line with those principles, they will make an award on those terms or if both are in accordance then it simply comes down to whichever is most consistent.”