The Ministry of Housing, Communities and Local Government issued a policy statement, Supporting businesses with Commercial Rent Debts on 4 August 2021 setting out how it intends to legislate to “ringfence” rent arrears as a result of enforced closure of businesses due to the COVID-19 pandemic. The policy will also address and detail the process of binding arbitration between the landlord and tenant.
Key points to note from the policy are:
· They will legislate to “ringfence” rent arrears for commercial tenants that have accrued from March 2020 until when restrictions have been lifted.
· It has been made clear that ringfencing” will not protect rent arrears prior to March 2020, or when restrictions have been lifted and those not affected by the enforced closure. Landlords therefore can evict tenants for rent arrears prior to March 2020 and when the ringfenced period ends.
· Section 82 of the Coronavirus Act 2020 provides protection for the eviction of commercial tenants for non – payment of rent and this will continue until 25 March 2022, unless legislation has passed prior to this date.
· Commercial tenants who have not been affected by the enforced pandemic closure, and have the resources to pay, then should pay.
· At present, Landlords cannot issue a winding up petition or statutory demand in relation to rent arrears as a result of the pandemic until 30 September 2021. In due course further measures will be announced in relation to this.
· A revised Code of Practice will be issued detailing what is expected of the landlord, and the arbitrators this has to be complied with during the arbitration process for tenants who are looking to resolve the rent arrears.
· It is expected that the cost of the arbitration should be shared by the landlord and tenant, if they have negotiated in good faith.
· Binding arbitration should only be used as a last resort where neither party can reach an agreement.
This update is for information purposes only and should not be relied upon as a substitute to legal advice and does not amount to legal advice.