The Commercial Rent (Coronavirus) Act 2022 is now in force, and the general moratorium against forfeiture, re-entry and Commercial Rent Arrears Recovery (CRAR) is over.
Landlords may now be able to recover unprotected rent; enact forfeiture and CRAR; and petition to wind up a company in respect of unprotected rent that is in arrears.
Unprotected rent is basically rent that isn’t owed because of the Covid-related restrictions and closures that took place between March 2020 and July 2021.
Protected rent arrears are ring-fenced, so that if an agreement for repayment hasn’t been reached, there is now a 6-month period (ie until 24 September 2022) for landlords and tenants to refer the arrears to arbitration.
Only after 24 September 2022, if there is no arbitration or at the end of the process, might the landlord then be able to take further steps to recover the protected rent debt.
Either a landlord or tenant can apply unilaterally for arbitration. The arbitrators will look at the parties’ businesses and attempt to strike a balance between preserving the viability of the tenant’s business and preserving the landlord’s solvency. How this will work in practice remains to be seen.
Arbitrators may write off debts in full or in part, defer the debt for up to 24 months, or grant no concession at all.
The most important effect of the arbitration scheme might simply be to encourage landlords and tenants to strike a deal outside of the process, given the uncertainty of its outcome for either party.
The Act gives guidance on the arbitration bodies that can be approached and the timetable for arbitration.
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