Towards the beginning of this month, the business Secretary indicated that measures would be taken to ensure that those business which had built up rent arrears for their commercial premises, would be given time to be able to resolve those arrears, without fear of repercussion.  Those measures have been now been published in the Commercial Rent (Coronavirus) Bill.  Whilst the Bill is not expected to come into force until the Spring of next year, ultimately, the intention of the Bill, is to ring fence any debt that arose between the 21 March 2020 and 18 July 2021; with a later date of 7 August 2021 (for Wales); to prevent a landlord from issuing claims in respect of that rent or indeed forfeiting, until there has been some form of arbitration in respect of the arrears.

Ultimately, within 6 months of the inception of the Bill, the landlord or the tenant have the ability to notify each other of their intention to refer any debt that accrued during the relevant period, to an arbitrator. The party who applies, must propose a resolution, in relation to payment of any sums; and the responding party must also make a counter proposal. If an arbitrator is of the opinion that this matter has already been resolved, but one party is taking advantage of the legislation to try and have this issue reconsidered, it can automatically dismiss the application. Equally, if a tenant’s business is never going to be viable enough to meet the outstanding debt, then an arbitrator can again dismiss the application. If however an arbitrator excepts any application which has been made, the arbitrator can consider what steps can be taken regarding payment of any arrears, subject to a maximum timeframe for the debt to be repaid of 24 months. The award is binding, and there is no ability for the position to be referred to a Judge or other body for consideration.

Most importantly, until the arbitration has been concluded (or indeed until an arbitrator has dismissed an application) it is not possible for landlords to issue a claim for recovery of the rent; to use CRAR for the debt, to forfeit for the debt, to utilise a rent deposit towards that debt, or to wind-up a tenant. Most importantly, any proceedings issued between 10 November 2021 and the date on which the Bill is passed can automatically be stayed to require this process to be undertaken, and therefore effectively putting the steps into place with immediate effect.

The arbitration process is however considered to be a last resort, and landlords and tenants alike are encouraged to try to resolve matters amicably, within those parameters, before this process comes into force.  As stated, if agreed terms have be reached, then the arbitrator can simply dismiss the claim and there is no need for matters to be referred to them. It is unknown at this stage, how long the arbitration process will take, if it is utilised by any party in particular.

Should have any queries regarding your commercial lease, including rent arrears or otherwise, you should contact Lorraine Lancaster on 01702 662963 (Essex)  020 35537115 (London) or by using the contact form below.

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This article does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. If you require specialist advice on this topic, please contact us to discuss how we may assist you.

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