Legal News | 16.05.22

Commercial Rent (Coronavirus) Act

A new law has come into effect to provide an arbitration process for landlords to resolve outstanding commercial protected rent debts following the pandemic.

To be considered a protected rent debt, the debt must be:

1. A commercial rent;

2. Adversely affected by coronavirus; and

3. Due for the protected period.

Adversely affected

To be deemed adversely affected, the whole or part of the tenant’s business must have been subject to a closure requirement due to Coronavirus.

Protected period

The rent debt must also be due for the protected period: a period of mandated closure as a result of specific coronavirus restrictions. This period will be from 21 March 2020 until 18 July 2021; however, exact dates may change as they are subject to when restrictions for that business were in place. Businesses which were never subject to closure requirements such as supermarkets, will have no protected rent debt and be unable to use this scheme.

Arbitration scheme

The Act allows for a 6 month window for either the landlord or tenant to bring an application into the arbitration scheme.

The arbitrator may then decide to effectively write off all or part of the debt (including interest) and/or defer payment for up to 24 months from the date of the award; alternatively, they may award no relief.

Landlord remedies

Landlords will be unable to exercise their other remedies in respect of protected rent debts until either the arbitration process has finished or until the 6 month period ends. This will include:

1. Forfeiture;

2. Commercial Rent Arrears Recovery;

3. Right to draw down on a rent deposit; or

4. Issuing a winding-up petition or a bankruptcy order.

For unprotected rent debts, all the previous restrictions have now ended in England and Wales so landlords are able to use all their remedies.  

Currently, as the scheme has only just been implemented, we are yet to see its influence; however, as more cases are heard a clearer picture will emerge of how the outcomes will affect landlords and tenants alike.