Thursday, 11 November 2021

COVID-19: New Proposals for Treatment of Pandemic-Related Commercial Rent Arrears Released

The government has finally announced its detailed proposals on how commercial rent arrears accrued during the pandemic should be dealt with.

The Commercial Rent (Coronavirus) Bill was introduced in Parliament on 9 November 2021, along with a new Code of practice for commercial property relationships following the COVID-19 pandemic.

The Bill will only apply to commercial rent arrears that accrued while businesses were forced to close during the pandemic.

It ring fences rent, service charge, insurance, interest on overdue amounts and rent deposit top-ups.

The ring-fenced sums are protected rents for a protected period beginning on 21 March 2020 and ending on the day when the premises were not subject to closure or restrictions regulating their use, for example limits on numbers or mandatory table service. For hospitality businesses in England, that date will be 18 July 2021.

The Bill provides for a new statutory arbitration process for commercial landlords and tenants who have not already reached an agreement on how to deal with the arrears. Any agreements made voluntarily before the Bill comes into force will not be affected.

It is proposed that the new arbitration scheme will last for 6 months from March 2022, and during that period enforcement of protected rent arrears accrued during the protected period by court proceedings, CRAR, forfeiture or winding up will be prohibited.

The Code replaces the earlier version first published in June 2020, and subsequently updated in April 2021, and provides guidance on how parties should approach negotiation regarding rent arrears that accrued during the pandemic.

It also includes guidance on the arbitration process, the evidence that will be considered and the principles the arbitrator will apply.

The government aims to pass the Bill by 25 March 2022, subject to parliamentary approval. The existing moratorium on forfeiture, CRAR and winding-up petitions will remain in place in the meantime.

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