Commercial rent arrears update

In a press release from the Government yesterday (9 November 2021), a revised Code of Practice will be introduced along with new laws in connection with commercial rent arrears.

Revised Code of Practice

  • The new Code of Practice will deal with how landlords and tenants negotiate rental arrears before parties can undergo the binding arbitration process.
  • It replaces the ‘Code of Practice for commercial property relationships’ originally published on 19 June 2020 and updated in April 2021 and applies across the whole of the UK.
  • The new Code of Practice will need to be assessed when its launched but the message seems to be that where tenants can pay rent, they should do so. By way of balance, landlords should also consider reductions, deferments and even waiving arrears, depending on the severity of the situation.
  • The new Code of Practice applies to all arrears which have accumulated as a result of the pandemic, even to those businesses which didn’t close but were still adversely affected.

New laws

  • The Commercial Rent (Coronavirus) Bill will deal with the binding arbitration process where commercial landlords and tenants have not come to an agreement.
  • The Bill applies to business that were forced to close fully or in part.
  • The arbitration is meant to be used as a last resort mechanism.
  • There will be a window to apply for arbitration- six months from the date the new legislation comes into force with a maximum timeframe to repay of 24 months from then.
  • Private arbitrators will be appointed and the Government will issue a list of approved bodies.
  • The new legislation will apply to England and Wales only.
  • The Bill is expected to become law in 2022.

Forfeiture and court proceedings

The ban on instigating forfeiture proceedings remains in place until March 2022.

After the Bill receives Royal Assent, landlords will not be able to commence money claims for rent debts (this also includes CRAR and bankruptcy proceedings where premises were legally forced to close).

For proceedings which have been issued between now (10th November 2021) and then, parties can apply for a stay of proceedings for the matter to be referred to arbitration. However, if a judgement is awarded, this can still be referred to the legal arbitration process when this comes into effect.

Negotiate where possible

The running theme of the Government narrative is to encourage parties to negotiate where possible; the art of negotiation is a skill.  BLM can assist with this as well as to advise you of the best option for your case.

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.

Who to contact

Priya
Sejpal

Associate , London

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