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Commercial rent arrears recovery

View profile for Andrew Whitehead
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Commercial rent arrears recovery

The last 2 years have been economically challenging for many businesses including landlords of commercial premises. There has been significant changes and differing measures in place in relation to the recovery of unpaid rent by tenants. During the pandemic, certain relief was granted to tenants in relation to unpaid rent. This was outlined in the ‘code of practice for commercial property relationships’ issued on 19 June 2020. The code meant that landlords could not unnecessarily seize goods owned by the tenant in lieu of rent, and it prevented businesses in rent arrears from being made insolvent by their landlord.

However, some landlords and tenants were not able to resolve their disputes. Therefore, in April 2021 the Commercial Rent (Coronavirus) Bill and the commercial rents code of practice were set out. The code is a framework defining how landlords and tenants move from dispute to resolution, encouraging negotiation. This code was relevant for all commercial rent debts (including service charges and insurance) accrued since March 2020 within England and Wales to assist with the terms of negotiation. It was not law, but it did refer to the Commercial Rent (Coronavirus) Bill and proposed legislation on binding arbitration.

On 24 March 2022, the bill became law, meaning that it provided a legally binding arbitration process to resolve certain outstanding commercial rent debts related to the pandemic where agreement cannot be reached. It outlined that arbitration should be used as a last resort and commercial landlords and tenants were encouraged to negotiate agreements using the code of practice. The code says that where tenants are able to pay they should do so, and landlords are encouraged to share the burden where difficulties remain.

The bill itself is only applicable to protected rent arrears debts accrued by different business that were forced to close between 21 March 2020 to 18 July 2021 in England and 7 August 2021 in Wales.

The bill and code are extensive, and we understand that you may need further clarification regarding this and when arbitration should be used. We can assist with this. There is a 6-month window to apply for arbitration from when the law was passed on 25 March 2022 and exemptions can be granted to some tenants.

Our commercial litigation team can assist commercial landlords who have a hybrid of rent arrears which can include those that fail with the timeframe of the Commercial Rent (Coronavirus) Bill and where landlords have rent arrears debts that fall outside of this period.