Government Introduces New Bill & Code To Help Resolve Pandemic-Related Commercial Rent Arrears

The Government has published its new measures to assist commercial landlords and tenants in resolving rent arrears accrued as a result of the pandemic.

The Commercial Rent (Coronavirus) Bill, alongside a new Code of Practice, outlines what rent debts will be covered by the legislation and for what period. It then provides a means of resolving any dispute between a landlord and tenant through a process of arbitration.

The legislation will apply to England and Wales only. However, Northern Ireland may also introduce similar legislation.

It is hoped that the Bill will provide job security to many UK workers, prevent further damage to the economy and allow for a return to normal business relations.

The legislation is the latest set of measures that the Government has introduced as a result of the Coronavirus Act 2020. Previously, the Government introduced measures that protect tenants being evicted until 25 March 2022, in order to allow them time to negotiate sharing rent debts with their landlords.

Key points of the Commercial Rent (Coronavirus) Bill

The key points of the Bill are as follows:

• It will only apply to a business tenancy as defined by the Landlord and Tenant Act 1954.
• Rent will include service charges and interest.
• The Bill defines the term “protected rent debt” as being a rent due if the tenancy was ‘adversely affected’ by the pandemic during the ‘protected period’ (between 21^st March 2020 until 18^th July 2021). ‘Adversely affected’ is defined as premises that were subject to mandated closures.

Arbitration process

Part 2 of the Bill creates an arbitration process whereby the arbitrator can decide on what rent is payable, including total or partial relief or repayment over a period of up to 24 months. The process can be decided either by written or oral representation. Binding arbitration is only to be carried out in cases where landlords and tenants are not able to come to a resolution.

If a tenant is not able to pay their rent, in accordance with the terms of their lease, or inline with alternative arrangements agreed with their landlord, they will be bound by the arbitrator’s decision. They will subsequently be made to pay the rent arrears accrued during the ringfenced period.

The Bill is making its way through Parliament. However, it is essential that both landlords and tenants start preparing now.