In light of the COVID-19 pandemic, from 21 March 2020, the government introduced a range of temporary legislation measures which have restricted a landlord's ability to:
The restrictions on landlords ended on 25 March 2022, these being the longest-lasting of the pandemic. Landlords have returned almost all rights of remedy available to them in respect of rent arrears.
The Commercial Rent (Coronavirus) Bill and an updated Code of Practice were released on 9 November 2021. These together provided guidance to landlords and tenants concerning pandemic rent debts and introduced a proposed arbitration scheme (effective from 25 March 2022). This legislation provides tenants with continuing prevention on the enforcement of 'protected debts'.
Protected debts are those incurred when a business was subject to 'closure requirements’ or subject to a 'specific coronavirus restriction'. In England, closure requirements were in place until 18 July 2021, albeit there are different dates applicable to different sectors up until that specific date. The Bill will not protect a tenant from rent arising outside of the relevant period, and the arbitration process will only apply to protected debts and rent. The Code suggests that every effort should be made for the landlord and tenant to reach their settlement before reverting to the arbitration process. For a tenant, the Code explains that they should meet its obligations under the relevant period in full, where affordable, although the tenant should not have to take on more debt or restructure the business simply to pay the protected debt or rent.
The arbitration process intends to impose a legally binding agreement upon the landlord and the tenant, resolving rent arrears disputes and helping the market to return to normal as quickly as possible. While the parties are free to continue to negotiate outside of the legal arbitration process since now the legislation is in force, the window to apply for arbitration will close on 24 September 2022. The maximum time frame to repay any arbitration award will be 24 months. The Bill relates to a protected rent debt where rent is due under a tenancy that was adversely affected by the pandemic. A business tenancy is considered to have been adversely affected during the relevant period where the whole or part of the premises was of a description subject to a closure requirement; this is assessed on a business by business basis.
At the time of the viability assessment, if the arbitrator determines that the business is not viable and wouldn't be even if the tenant were to be given relief from payment of any kind, the arbitrator must make an award dismissing the reference.
The arbitrator’s principles are that any award should be aimed at preserving or restoring and preserving the viability of the business of the tenant so far as that is consistent with preserving the landlord’s solvency.
The arbitration process will not apply to rent arrears accrued outside of the relevant period.
Currently, there aren't any details covering how the practicalities of the arbitration process will work or what the evidential requirements will be. As a result, it is not sufficient for directors to only rely on the forthcoming arbitration process. Proactive steps need to be in place alongside a plan of action. These steps should include a variety of scenarios that will avoid a possible administration or liquidation.
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A moratorium procedure as introduced by the Corporate Insolvency and Governance Bill 2020