On 9 November 2021, the government gave its first reading of the new Commercial Rent (Coronavirus) Bill and updated its Code of Practice introduced to deal with the commercial rent arrears accrued during the pandemic.
Please note: the information contained in this legal update is correct as of the original date of publication.
On 9 November 2021, the government gave its first reading of the new Commercial Rent (Coronavirus) Bill and updated its Code of Practice introduced to deal with the commercial rent arrears accrued during the pandemic.
As well as setting out the details of the formal arbitration process, which we will come on to below, the amended Code also confirms that the proposed Bill will prevent certain remedies being available to landlords for ring-fenced debt (i.e. those arrears from 21 March 2020 until the last date restrictions were removed from the tenant’s sector).
It will prohibit the landlord from forfeiting, winding up, drawing down on rent deposits and issuing debt proceedings whilst an arbitration is ongoing. However, once the Bill becomes law, landlords will be able to take action for any arrears accrued after the ring-fenced period or before March 2020.
With regard to the binding arbitration process, a proposed timetable is set out showing that the parties will need to comply with a compulsory pre-application stage (including a formal letter of notification) before then formally applying for arbitration. The process will allow the parties to put forward their own proposals, within set timeframes, before the appointed arbitrator makes a decision either at a hearing or on paper.
Interestingly, throughout the Code, there is an ongoing set of guidance and principles which landlords and tenants should adhere to when dealing with these rent arrears.
The keys pieces of guidance include the following:
The government hopes that by providing a structure to the legal procedure and evidence that will be required to bring forward an application, this will allow both tenants and landlords to prepare their case where negotiations are failing / have failed. This update provides some answers to tenants as to what evidence and financial information is required for the arbitration, which will allow them to collate this in advance of March 2022.
However, whilst this code has provided us with a helpful overview of the process, it does not provide answers to specific questions, such as the status of guarantors in these cases or the impact on businesses who were partially open during the pandemic. As the Bill will be scrutinised within parliament in the coming months, it will hopefully not be too much longer before these questions are answered.
Published by Sarah Parkinson and James Coles.
Partner
sarah.parkinson@brownejacobson.com
+44 (0)115 976 6575