With the easing of restrictions, life is gradually resuming back to normal. However, the introduction of the Commercial Rent (Coronavirus) Act 2022 (‘the Act’) which has been in force since 24 March 2022 has changed some aspects of the relationship between commercial landlords and tenants.
This Act provides for relief from payment of protected rent debt due from a tenant to the landlord under a business tenancy. This is now to be resolved by arbitration and the Act also restricts what landlords can do during the relevant period.
Commercial Rent Arrears
Rent has been defined in the Act to include monies due under a commercial lease for use and possession of the premises, the amount payable as service charge, and any interest due under these sums.
A protected rent debt is unpaid rent if the tenant can show it was adversely affected by the coronavirus or that the rent was attributable to a period of occupation during the protected period.
Whether a business was ‘adversely affected by the coronavirus’ is determined if, for any relevant period, the whole or part of the business carried on by the tenant from the premises in the tenancy, or the whole or part of the premises was subject to a closure requirement from 2pm 21 March 2020 to on or before 11:55pm on 18 July 2021. Who was adversely affected will need to be determined on a case-by-case basis. The protected period runs from 21 March 2020 until 18 July 2021 or the last day on which the tenants’ business or the premises itself was subject to a closure requirement from the government.
If the above factors are fulfilled, the Act will apply. The Act does not interfere with parties resolving the unpaid protected rent debt by agreement or the enforceability and effect of such agreement. However, if there is no agreement between the commercial tenant and landlord about how to resolve the payment of the protected rent debt, there are further provisions that apply.
Arbitration
The Act allows either the commercial tenant or landlord to refer the protected rent debt matter to arbitration. This period currently lasts for 6 months from 24 March 2022 to 24 September 2022. However, the Government has the discretion to extend this period further.
Arbitration is a form of dispute resolution where parties appoint an arbitrator who is empowered to make a binding decision on the dispute. Arbitration under the Act is different as the arbitrator must be from the list of approved arbitrators from the Secretary of State.
There is a process and timeframe for notifying the other party about the arbitration in that: -
- The other party must be notified of the intention to refer the matter to arbitration.
- The other party may respond within 14 days of receipt of such notification.
- The party can only refer the matter to arbitration 14 days after the date of receiving the response or if there is no response, 28 days from notification.
There are factual circumstances that the arbitrator will need to consider when deciding what arbitration award to make, or whether to dismiss the arbitration altogether.
Prohibitions/Restrictions
If you are a landlord who is owed a protected rent debt, you are prohibited from taking the following actions from 24 March 2022 for a period of six months or until the arbitration is concluded:-
- Make a debt claim in civil proceedings
- Use the Commercial Rent Arrears Recovery scheme
- Enforcing the right of re-entry or forfeiture
- Using a tenant’s deposit
The Act also incorporates provisions to govern claims which are already issued at Court regarding protected rent debt, the landlord’s rights to appropriate rent, any appropriation by the landlord that has already happened, prohibition on landlords to present a winding-up petition or a bankruptcy petition in relation to a protected rent debt. In addition, if a Bankruptcy Order has been granted from 10 November 2021 to 24 March 2022, the Act provides for these to be voided.
Legal Advice From Witan Solicitors
Witan Solicitors is a firm with diverse experience of over 40 years in dispute resolution, specialising in commercial and civil litigation. We pride ourselves on spending time understanding our clients’ needs and objectives. We give our clients clear and pragmatic advice to ensure they have options available to them, so they are fully informed when they decide how they wish to proceed.
Contact our specialist debt recovery solicitors in London, Birmingham and Northampton at info@witansolicitors.co.uk.
