At the beginning of November (Tuesday 9 November 2021), Business Secretary Kwasi Kwarteng announced that a new set of laws and a Code of Practice, have been introduced to resolve the remaining commercial rent debts accrued because of the pandemic.
Under the emergency Coronavirus Act 2020, enacted on 25 March 2020, commercial landlords are precluded from forfeiting commercial leases and evicting the tenant for non-payment of rent. Originally this was due to end 30 June 2021. However, on 16 June 2021, the Government announced that they would extend the moratorium by a further 9 months until 25 March 2022.
The Government hoped that this additional breathing space would allow landlords and tenants to negotiate how to share the cost of commercial rent debts caused by the pandemic.
From the 9th of November 2021, landlords and tenants must follow a strict code of practice when undertaking negotiations, which provides a clear process for settling outstanding debts before the new arbitration process comes in to force next year.
New laws introduced in the Commercial Rent (Coronavirus) Bill, introduced in Parliament as part of the announcement, will establish a legally-binding arbitration process for commercial landlords and tenants who have not already reached an agreement, following the principles in the Code of Practice. Subject to Parliamentary passage, this will come into force from 25 March 2022.
Furthermore, from 10th November, the Government also announced that regarding rent arrears accrued during the pandemic, it will protect commercial tenants from debt claims, including County Court Judgements (CCJs) and High Court Judgements (HJCJs) and bankruptcy petitions.
Business Secretary Kwasi Kwarteng said:
“Today’s measures provide commercial landlords and tenants with the clarity and certainty they need to plan ahead and recover from the pandemic.”
“We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”
What are the next steps for Commercial Landlords?
The updated Code of Practice clarifies that the preservation of the tenant business’ viability should not come at the expense of the landlord’s solvency and stresses that where affordable, the tenant should aim to meet their obligations under their lease in full. However, it has also been made clear that tenants should not be made to take on more debt or restructure their business, in order to pay their rent.
The code aims to deliver a process by which parties should approach negotiation, with the intention that where possible, they should resolve rent disputes before the Bill comes into force.
Following the expiry of the moratorium on 9 November 2021, it is good news that commercial landlords and tenants can go back to some normality following the impact of the coronavirus pandemic. Larcomes is always on hand to provide clients with expert advice regarding their dispute, whether this is through negotiation with the other side or through formal legal proceedings.
Commercial Litigation Team
With the expiry of the moratorium period only a few months away, and if you are a commercial landlord or tenant concerned about rent arrears, it is advisable to seek advice sooner rather than later and before taking any action.
Our specialist commercial litigation and dispute resolution team can provide expert advice and guidance for all types of commercial landlord and tenant clients, providing clear, robust, and practical solutions that deliver results. Where possible, we believe in resolving disputes via the alternative dispute resolution process, such as mediation and arbitration, avoiding the courts where necessary. However, we will always deliver a solution that is right for our clients and their situation.
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To speak with one of our specialist landlord and tenant team please call on 023 9244 8100 or make an online enquiry