What is the Commercial Rent (Coronavirus) Bill?
We live in uncertain times and one thing that seems to be a constant is both the level of legislation introduced in the period since Coronavirus hit, and the considerable difficulties in handling debts in relation to commercial tenants who have been paying their rent during the pandemic. And given that there is an estimated £7bn commercial rent arrears that has built up during this period, this is a huge issue.
The latest change is the Commercial Rent (Coronavirus) Bill which has been introduced into the House of Commons on 9th November. If unamended and enacted, the law introduces radical change. These include have different arrangements for England and Wales and an arbitration system for debts in connection with commercial property rent due from tenants in the protected periods.
In short, that means you could simply lose ALL of your unpaid commercial rent arrears that built up during the pandemic.
Worried about Tenants’ unpaid rent? We always offer FREE initial phone advice with no strings attached. Call our highly experienced Property Dispute Resolution team on (01722) 422300 or FREEPHONE 0800 1404544.
Progress of the Commercial Rent (Coronavirus) Bill – watch this space – March 14th, 2022 update
The bill is still progressing through the Houses of Parliament and it may be subject to amendment – which is another reason to obtain legal advice. The bill was introduced on November 9, 2021 and as at March 14th, 2022, is in the House of Lords at the 3rd reading stage, after which there are only 2 further stages – “Consideration of amendments” and Royal Assent before the Bill becomes law.
The latest amendments being tabled are to make it clear that references to tenant in the bill also mean anyone else due to pay the rent under the lease. This, we suspect, is to limit action against any guarantor. They also provide that the usual award for the arbitrator’s costs should split equally between landlord and tenant. However this provision can be amended if needed, should the arbitrator wish to do so.
Why The Bill is so Important –Its Impact on Landlords Recovering Debt From Commercial Tenants Not Paying Rent During The Pandemic?
The Bill could have a substantial impact if enacted, Why? In short, it could result in any debt during the pandemic (and the “protected period” in particular) being determined by an arbitrator as unenforceable if certain criteria are met.
The regulation is likely to be complex. And it’s supported by a new Code of Practice, which was published on 9 November 2021. This code applies to all commercial leases held by businesses which have accrued rent arrears, because of an inability to pay caused by the COVID-19 pandemic. This covers all commercial rent debts built up by tenants since March 2020. The code of practice highlights specific dates for what they may deem was affected by Coronavirus for differing sectors. This is not in the bill but may be taken into account by an arbitrator. This is only a representation and will still be decided on a case by case basis.
The Bill really does bring in big changes. Arbitrators can overule judges – forcing them to stay claims, overriding their judicial powers. It will allows Arbitrators to determine sums due for the protected period, waiving sums due, if required, even if the lease states differently. In reality, it allows arbitrators to effectively rewrite existing leases.
Landlords are being encouraged to reach negotiated settlements with tenants about any outstanding rent arrears – in place of court proceedings.
Does this affect only Rent due from my tenant, or does it include Service Charges and insurance charges?
This would also include service charges and insurance charges together with other costs due under a commercial lease, such as management costs, should the bill go through unamended and the debt be one that is protected. (Part 1, Section 2(1),(2) & (3)).
What is meant by protected rent debt?
It is protected rent if:
- the tenancy was adversely affected by the coronavirus pandemic and
- the rent is attributable to a period of occupation by the tenant for a period during the protected period.(Part 1, Section 3(2))
What is the protected period?
It applies in principle to the period of the coronavirus pandemic – which is defined under the Bill,as the period starting in both England and Wales from 21 March 2020 and until the latest, for England 18th July 2021 and for Wales 7th August 2021.
The crucial importance of getting this right – how bad could this be for me?
If you get it wrong, you could entirely lose your right to a full 18 months rent. It’s a simple as that.
The arbitration scheme has certain criteria for a referral to be successful and to limit or reduce the debt or to delay payment by up to 2 years. If you are a commercial landlord and your tenant hasn’t been paying rent during the pandemic, it will be vital to put forward the right evidence to support your claim.
If you don’t produce the right evidence in the correct way, it could result in the arbitrator not awarding all of your rent – or at worst, nothing at all during that period.
What’s more, from the day the act comes into effect, any commercial landlord who is owed these type of rent arrears will be prevented from using the usual debt recovery tools including the issue of debt proceedings, exercising of the right of forfeiture and draw-down of the tenant’s rent deposit.
Our commercial tenants not been not paying rent during the pandemic. What can I do next?
Don’t take any chances. Don’t delay.
It is still uncertain when the Bill will come into force,but it’s quite likely that if you’re swift, you still have time to instruct us and for us to get judgement, and your rent arrears paid for the outcomes into force.
Currently, if unamended, once the debt becomes paid, it will not need to be refunded to the debtor at a later stage.
But even if you are not able to do so, it will be absolutely essential that your case is properly argued to the arbitrator – to give you the maximum chance of getting your unpaid rent paid, and getting it paid swiftly.
So get the right legal advice by speaking to a lawyer who really specialises in this area. It’s surprising how few solicitors do. Our team includes a specialist property litigator with huge experience of commercial rent recovery.
We are always happy to provide initial phone advice to commercial landlords. And if you want to take the matter further, we will be happy to review your file and go through the next steps with you.
But what happens if I want to go ahead with arbitration?
Alternatively, you may be a Landlord with a commercial tenant and you both want to reach an agreement to enable you both parties to move forward with certainty.
If an arbitrator upon reviewing the evidence, concludes that you have both reached an agreement on the issue of unpaid commercial rent during the pandemic, they have no choice but to dismiss any referral for arbitration. (Part 2, Section 13(2)).
If you’re looking to secure an agreement about unpaid rent with your commercial tenant – we can help. Just give us a call.
Who are these Arbitrators going to be?
Good question – but it’s still unclear. It appears that the Government is now preparing a register of arbitrators, and those arbitrators are expected to include surveyors and accountants.
Commercial tenants not paying rent during the pandemic? Looking for Specialist Solicitors? Call Now
Don’t risk losing 18 months worth of rent. If your tenant has not been paying up, call our specialist commercial property disputes team today for a FREE no obligation initial phone chat about recovering that unpaid rent.
- Call our team on (01722) 422300 or FREEPHONE 0800 1404544 OR
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