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Pandemic Rent Debt Assistance

 

On this page we have summarised what the Government intends to do about the problem of rent debt accrued during the pandemic.

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?

  • Measures to support and protect tenants have been extended by the Government.
  • The Government has updated its Code of Practice as to how landlords and tenants should interact on the issue of rent debt relating to the pandemic.
  • Both landlords and tenants are encouraged to come to an agreement on any outstanding rent.
  • The Government announced the introduction of new legislation to deal with rent debt incurred during the pandemic.
  • If landlords and tenants cannot agree either party may apply for binding arbitration on the issue.
  • The Government has made it clear that only tenants who were mandated to close during the pandemic will be able to access the arbitration scheme.
  • Only tenants who were mandated to close will receive protection from debt proceedings and winding up petitions in the courts.

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

  • The Government has proposed legislation to introduce binding arbitration.
  • The Government has published a draft bill as to how the process will work in practice.
  • Tenants and landlords will submit evidence to an arbitrator and plead their case.
  • This may be in the form of an oral hearing if requested.
  • Proceedings may include expert evidence.
  • The applicant will pay the costs of the arbitrator as part of the application process.
  • The draft bill suggests the arbitrators’ fees will be split 50/50 (but may be up to 100% on either party), with no power for the arbitrator to make an adverse order on other costs.
  • The arbitrator will decide the case on the evidence submitted.
  • The arbitrator’s decision will be binding.
  • Only tenants whose businesses were forced to close as a result of the Government mandates will be eligible for the arbitration scheme.

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 proposing to introduce restrictions on debt recovery from tenants ‘in scope’ from 10th November 2021.
  • 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.
  • Tenants will effectively be locked out of CVA/IVA options if the landlord applies for the arbitration scheme.
  • Where agreements cannot be reached between landlord and tenant, there will 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 accrued during the pandemic until restrictions were 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

  • We do not know anything about the arbitrators who will decide the cases, although we anticipate they will be appointed from relevant professions.
  • We do not know precisely when the new scheme will be implemented.
  • We do not know the costs of the application for arbitration.

What might happen?

The Government’s proposals have been released in the form of a new Code of Practice and a draft bill laid before Parliament.

  • 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 will be ring-fenced and protected. This will 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.