The Government has just introduced the Commercial Rent (Coronavirus) Bill into Parliament which seeks to introduce a statutory arbitration process for dealing with any outstanding Covid arrears that arose during a set period.
The Bill grants commercial landlords and tenants, who have not agreed how to deal with Covid closure related arrears, the right to compel the other party to enter a statutory arbitration process, for a period of 6-months starting on the date the Bill becomes law, which is expected in March 2022, to resolve the issues between them. These arrears cover rent, service charge, insurance contribution, VAT and interest and the right will apply if the tenant’s business or property was forced to close due to Covid for a “protected period” which was from 21 March 2020 to either 18 July 2021 (England), 7 August 2021 (Wales) or the actual date the property or business was forced to close if later.
To encourage commercial landlords and tenants to use the statutory arbitration process, commercial landlords will neither be able to present winding up petitions against companies or bankruptcy petitions against individuals for any rents accrued during the protected period nor pursue a debt claim and any claims already in progress on 10th November 2021 will be stayed on the application of either party. In addition, once the statutory arbitration process has begun, the Bill stops landlords applying for CRAR and forfeiting.
The intention of this carrot and stick approach is to preserve the landlord’s solvency and viability of the tenant’s business and to achieve this both parties are given the opportunity to state their case but, if they cannot agree, the arbitrator can defer, reduce or even write off the debt so it is clear that finding a workable resolution will be the best approach.
The Bill still has several steps to go through before it becomes law so the detail may change, and we will issue regular updates on the Bill’s progress but please contact us if you would like any more information or a view on whether it could benefit your business.
If you have any questions concerning commercial property, contact a member of our property team on 01494 521301.