As a result of the government’s response to COVID-19, many businesses were forced to close. A moratorium preventing commercial landlords from forfeiting leases for rent arrears was also introduced. This moratorium has been extended until 25 March 2022.
On 4 August 2021 the government announced that all commercial rent arrears incurred during the pandemic at a time of forced closure, are to be ring-fenced. The aim behind this is to encourage commercial landlords and tenants to reach an agreement to either waive some of the arrears or offer longer repayment terms.
The government are currently in the process of implementing a mandatory arbitration process for commercial landlords and tenants to follow under the Commercial Rent (Coronavirus) Bill (the “Bill”) when agreements between the parties themselves cannot be reached.
Once the Bill becomes an Act of Parliament, it intends to be applicable to businesses that were adversely affected by COVID-19, where the whole or part of the business or whole or part of the premises was subject to a forced closure (“Closure Requirement”).
Any rent incurred during a Closure Requirement will be ringfenced. A moratorium on any court proceedings will be introduced in relation to any rent arrears accrued during the Closure Requirement.
On 9 November 2021, the UK government further updated the code of practice (the “Code”) requiring parties, to be transparent, collaborative and act in good faith when dealing with each other.
The parties are to consider whether the arrears can be waived, deferred for payment and/or whether interest can be waived. Should the parties not reach an agreement then the new mandatory arbitration scheme will apply.
The Bill was introduced at the House of Commons on the 9 November 2021 and is currently at its second reading at the House of Commons.
Links to the Code and the Bill can be located below:
The above is our understanding of the above topics as of 18 November 2021.
If you would like to discuss the Bill and how it may affect your business, please contact our property litigation team.
Subir Desai - Partner
Alice Lane - Senior Associate
Francesca Robson - Solicitor
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