Many commercial landlords, who are owed rent arrears, will breathe a sigh of relief after a general moratorium on commercial evictions in England and Wales ended on 25 March.
The moratorium on the Commercial Rent Arrears Recovery (CRAR) rules, was introduced in 2020 as a temporary measure as the country was locked down by the COVID-19 pandemic. It was extended on 16 June 2021.
Now the Government has introduced a new law, the Commercial Rent (Coronavirus) Act 2022, to help resolve certain remaining commercial rent debts caused by the pandemic.
Under the new legislation, the Government says eligible firms remain protected for the next six months during which arbitration can be applied for or until the conclusion of arbitration.
This covers tenants who had to fully or partially close under the coronavirus regulations.
How does the new law work?
The new law came into effect on 24 March 2022 and means 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 which applies to England and Wales covers 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 within the scope.
CRAR, which came into force on 6 April 2014, allows landlords of commercial premises to recover rent arrears by taking control of the tenant’s goods and selling them.
What was the purpose of the moratorium?
The moratorium was part of Government measures designed to provide firms with breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic.
The main objective in doing so was to protect jobs, by allowing businesses to continue to trade while struggling to pay their rent, while at the same time, encouraging landlords and tenants to resolve debt issues through negotiation or arbitration.
Business Minister Paul Scully said: “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.”
Clear process for settling rent arrears
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 can do so, and only as far as necessary, by waiving some or all rent arrears or giving time to pay.