Covid 19 - Commercial Rents

Business Secretary Kwasi Kwarteng has now put in place the mechanisms to hopefully avoid a major issue arising when commercial tenants cease to be protected from eviction in 25 March 2022.

The last year put in place protection to provide firms with breathing space for rental payments and so help protect jobs when certain businesses had to close in full or in part during the pandemic.

It was hoped that the extended moratorium would provide time for landlords and tenants to negotiate how to share the cost of commercial rent debts caused by the pandemic.

The package put forward by the Business Secretary provides for:

• New laws to be introduced to provide a legally-binding process to resolve the remaining commercial rent debts
• a new Code of Practice published to guide landlords and tenants in how to negotiate a way forward
• changes will protect tenants from rent debt claims against them and help market return to normality

To be noted the following only applies in England and Wales.

The Code sets out that, in the first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord waives some or all rent arrears where they are able to do so. For the detail please see New laws and code to resolve remaining COVID-19 commercial rent debts

From 25 March 2022, the Commercial Rent (Coronavirus) Bill, will establish a legally-binding arbitration process for commercial landlords and tenants who have not already reached an agreement, following the principles in the Code of Practice.

The Bill will apply to commercial rent debts related to the mandated closure of certain businesses such as pubs, gyms and restaurants during the pandemic. Debts accrued at other times will not be covered.

Also, and of significant importance to avoid pressure coming to bear by the threat of insolvency from 10 November 2021), the government is also protecting commercial tenants from debt claims, including County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions, issued against them in relation to rent arrears accrued during the pandemic.

UK Hospitality CEO Kate Nicholls OBE said:

“We welcome the publication of the updated Code of Practice. Vitally important is the emphasis on ongoing negotiation to share the burden of the impact of lockdowns and restrictions that prevented hospitality businesses from trading for so much of the last 18 months. It is in the long-term interests of landlords and tenants to come together and find solutions that ensure business survival and that do not undermine the economic recovery.

We share government’s view that arbitration should be a last resort and this process must take into account the exceptional and existential level of pain that hospitality businesses have faced over the last 18 months. It must not impact this industry’s ability to rapidly recover and create jobs throughout the country.”