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Commercial Rent (Coronavirus) Act 2022: Time to Act Now !

28th June 2022

With less than 3 months left for eligible business tenants to apply for arbitration to resolve any outstanding rent arrears accrued over course of the pandemic, James Fownes, a partner at  Shakespeare Martineau provides a summary below of what you need to know if you’re thinking of applying for arbitration.

Shakespeare Martineau has a specialist team of property litigators who can help advise and guide you through this process, if you would like more information on this contact [email protected]

The  Commercial Rent (Coronavirus) Act 2022 (“the Act”) is intended to support landlords and tenants to resolve payment of any outstanding commercial rent arrears accrued during any part of the period 21 March 2020 to 18th July 2021 when businesses were forced to close due to the various COVID-19 lockdown restrictions.

The Act stops landlords starting recovery or enforcement action against their tenants for these arrears at any time from now until 23 September 2022. This means that tenants have an opportunity to resolve matters now before their landlords can take any action against them.

Landlords and tenants are encouraged to use this new law to try to negotiate a solution between themselves. But if they cannot reach agreement, they can then refer the matter to an Arbitrator.

Arbitrators can resolve matters and ultimately impose a binding agreement. This could potentially include giving tenants further time to pay or rent holidays, or reducing or even extinguishing the rent arrears owing.

There are key points for you to consider to help you decide if you could benefit from the new protections:

  • The assistance only covers rent that fell due in the period 21st March 2020 to 18th July 2021.
  • Your business must have been forced to close completely for all or some time during that period.
  • You must be able to show that your business was otherwise “viable” during the time frame you’re referring for arbitration – those businesses which were effectively already insolvent are not covered by this arbitration scheme.

You are not eligible to apply for arbitration under the scheme if:

  • Your Landlord has already started formal recovery action against you prior to the 25th March 2022.
  • You have already reached agreement with your landlord as to how to treat any rent debt accrued during the relevant period.

Another important point to note is that starting the application process for arbitration  does not necessarily mean you are bound to end up in front of an arbitrator – most disputes referred are expected to be settled, outside of arbitration,  on terms agreed between the parties themselves.

Many landlords are not choosing to use the Act. They are likely waiting until the end of September deadline when they will  get their full enforcement rights back.  But tenants have the right to rely on these new provisions provided under the Commercial Rent (Coronavirus) Act 2022. However, if tenants want to utilise this process, they will need to act now as there are pre-arbitration steps that need to be taken by August.

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