The Government has today announced new laws and a Code of Practice to resolve the remaining commercial rent debts that have built up during the Covid-19 pandemic. This will provide tenants and commercial landlords with a legally binding process to come to an agreement on the rent arrears.
Commercial tenants are currently protected from eviction until 25th March 2022 under Government coronavirus legislation. This has provided time for many tenants and landlords to negotiate on how the commercial rent debts accrued by businesses forced to close will be paid.
According to data from the British Property Federation, in over 80% of the rent arrears cases landlords and tenants have already reached an agreement on the debt repayment.
There will now be a new Code of Practice in place which will set out a clear process for landlords and tenants to resolve outstanding debts. In the first instance, there should be negotiations with the landlord and the expectation is that, where they are able to do so, commercial landlords will waive some or all of the rent.
New commercial rent debts legislation
New laws being introduced into Parliament today in the Commercial Rent (Coronavirus) Bill are due to come into force from 25th March 2022. This will establish a legally-binding arbitration process for those commercial tenants and landlords who have not reached an agreement on commercial rent debts through the Code of Practice.
The Bill will cover those commercial rent debts that built up when specific businesses were mandated to close, in full or in part, by the Government. This includes restaurants, bars and gyms. Debts accrued outside of these mandated closures will not be covered. The new laws will apply to businesses in England and Wales.
Following the arbitration process, there will be a legally-binding agreement that both the tenant and the landlord must adhere to. The aim is to resolve remaining rent disputes quickly and enable the market to return to normal as soon as possible.
The Government is also protecting commercial tenants from debt claims for rent arrears accrued during the pandemic. This includes County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions.
Business Secretary Kwasi Kwarteng said: “Today’s measures provide commercial landlords and tenants with the clarity and certainty they need to plan ahead and recover from the pandemic.
“We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”
British Property Federation CEO Melanie Leech commented: “Property owners and their tenants should be wholly focused on working together to continue the economic recovery from the Covid-19 pandemic. The majority have already reached agreement on the treatment of Covid-related rent arrears, with millions of pounds of support being provided by property owners to tenants in distress.
“The publication of an updated Code of Practice is a clear signal and framework for the minority who have not yet done so, to come together, reach agreement and look to the future.”