Posted: Tue 9th Nov 2021
Businesses forced to close during the pandemic and unable to pay commercial rent will be protected from being taken to the court by their landlords under new laws announced today.
Since the start of the coronavirus crisis, there has been a ban on commercial evictions.
The government today announced that when the ban ends on 25 March 2022, companies will be protected from debt claims, such as County Court Judgements, issued against them for rent arrears accrued due to lockdown closures.
Ministers are establishing a new legally-binding arbitration process that landlords and tenants must adhere to after 25 March if they cannot negotiate an agreement.
Underpinning those negotiations is a new code of practice introduced from today. It says "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".
The new arbitration process is included in the Commercial Rent (Coronavirus) Bill, introduced to Parliament on Tuesday. It only applies to commercial rent debts due to the legally mandated closure of businesses such as pubs, shops, gyms and restaurants due to COVID-19 restrictions.
The new laws will come into force in England and Wales, while Northern Ireland will have a power in the Bill to introduce similar legislation.
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."
Kate Nicholls, CEO at UK Hospitality, 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."
Helen Dickinson, chief executive of the British Retail Consortium, commented: "The overwhelming majority of retailers with stores just want the breathing space to trade their way out of the debt unavoidably built up during the pandemic and a constructive agreement with their landlord.
"While we support the principle of compulsory arbitration, the devil will be in the detail on issues around what tenant viability really means in practice and the power of arbitrators. We will engage closely and constructively with government to help ensure their proposals protect otherwise viable businesses, secure the recovery, and protect jobs."
Remit Consulting said £6.4bn in rent arrears have built up since the start of the pandemic, although a survey by British Property Federation found agreement has been reached between landlords and tenants in 80% of cases.
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