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Pandemic Rent Debt Assistance

 

Here is the Commercial Tenants Association’s comprehensive summary of the rent debt problem that has been exacerbated by the COVID-19 pandemic since March 2020 in the UK.

Need specific advice?

If you require specific advice on your outstanding rent debt, or any other issue relating to your commercial tenancy, the CTA offer a paid advice service.

What is happening to the commercial rent debt problem?

What will happen if agreements cannot be reached on commercial tenant rent debt?

  • The Government has proposed legislation to introduce binding arbitration.
  • We have yet to see the details of how this will work in practice.
  • Tenants and landlords will submit evidence to an arbitrator and plead their case.
  • This may include expert evidence.
  • The arbitrator will decide the case on the evidence submitted.
  • The arbitrator’s decision will be binding.
  • Each party will normally pay their own costs, but arbitrators can make an award on costs, particularly if one party is acting unreasonably.

What we know so far:

  • Commercial evictions are on hold until the 25th of March 2022.
  • Winding up petitions are also suspended until the 25th of March 2022, though Statutory Demands can be served from the 1st of October. This does not apply to individuals.
  • Enforcement notices and seizure of goods under CRAR can only be actioned on rent debt older than 554 days.
  • The Government is expecting landlords to share the burden of the rent debt.
  • The Government strongly supports the notion that tenants who can pay, should pay.
  • Where agreements cannot be reached between landlord and tenant, there may be the opportunity to refer the matter of rent debts to an arbitrator, whose decision will be binding.
  • The Government will legislate to protect tenants who have been impacted by Covid-19 business closures by ring fencing leasehold debt until restrictions have been lifted on their sector.
  • Legislation will be introduced during the current parliamentary session. Sessions generally run from spring to spring, so this may mean we do not see the legislation enacted prior to March 2022.
  • The legislation will deal with how landlord’s and tenants sort out the problem of unpaid rent due to the coronavirus.
  • Arbitration will be a last resort and will bind the parties to any decision or ‘award’ made by the arbitrator.

What we don’t know

  • The details of the proposed legislation and procedure for arbitration.
  • Which sectors will be able to participate?
  • Will only those sectors obliged to close during the lockdowns be eligible for the scheme?
  • Or, will any tenant impacted by the pandemic be eligible?
  • What protection is there for tenants whose landlords will not negotiate and pursue the tenant for the debt through the courts?
  • Will the Code of Practice for landlords and tenants be made mandatory? How soon will this happen so tenants are better protected?
  • Will the moratoria be extended again?

What might happen?

There are very few details of the Government’s proposals.

  • The Government may need to introduce a framework or directions for negotiations and arbitration. A mandatory Code of Practice for landlord and tenant relations could be introduced as a result. This may include a write-off element of outstanding debt but it remains unclear at this stage.
  • There may be a significant number of cases where landlords and tenants cannot agree. The Government will then need to scale up existing resources to support the number of arbitration cases anticipated. This may require a rethink in how cases are decided and by whom. This might involve the use of independent experts who could be drawn from legal, surveying and financial backgrounds and could decide cases on their merits and their experience.
  • A proportion of tenant debt is likely to be ring fenced and protected. This may only address arrears up until 19th July 2021, when businesses were allowed to fully reopen. However, this approach would not acknowledge the time it takes for businesses to recover, particularly those burdened with loans.
  • More time? The moratorium may need to be extended again to allow time for proceedings to take place.

Need specific advice?

If you require specific advice on your outstanding rent debt, or any other issue relating to your commercial tenancy, the CTA offer a paid advisory service.