11 November 2021
New laws and a Code of Practice are being introduced to resolve the remaining commercial rent debts accrued because of the pandemic, Business Secretary Kwasi Kwarteng has announced today (Tuesday 9 November 2021).
Commercial tenants are protected from eviction until 25 March 2022, thanks to government action last year to provide firms with breathing space and help protect jobs when certain businesses had to close in full or in part during the pandemic. This provides time for landlords and tenants to negotiate how to share the cost of commercial rent debts caused by the pandemic.
From today, these negotiations will be underpinned by a new Code of Practice, providing landlords and tenants with a clear process for settling outstanding debts before the new arbitration process comes into force.
The Code sets out that, in the first instance, 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.
From 25 March 2022, new laws introduced in the Commercial Rent (Coronavirus) Bill, being introduced in Parliament today, will establish a legally-binding arbitration process for commercial landlords and tenants who have not already reached an agreement, following the principles in the Code of Practice. Subject to Parliamentary passage, this will come into force next year.
The Bill will apply to commercial rent debts related to the mandated closure of certain businesses such as pubs, gyms and restaurants during the pandemic. Debts accrued at other times will not be in scope.
These laws will come into force in England and Wales, and Northern Ireland will have power in the Bill to introduce similar legislation.
The result of the arbitration process will be a legally-binding agreement the landlord and tenant must adhere to, resolving rent arrears disputes and helping the market return to normal as quickly as possible.
From today, the government is also protecting commercial tenants from debt claims, including County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions, issued against them in relation to renting arrears accrued during the pandemic.
This measure will provide further protection to businesses that had to close and accumulated debts during the pandemic, while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020.
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.”
Andrew Goodacre, Chief Executive of British Independent Retailers Association commented:
“We welcome this new code of practice. It encourages both landlords and tenants to negotiate and share the burden caused by this pandemic. Independent retailers have worked so hard to reach this point after the hardest 18 months we can all remember, and it would be a tragedy if the ongoing survival of the business was jeopardized due to rental debt.
"Bira has been working with the government to protect those tenants with rent debt caused by the pandemic. A new code of conduct has been released to guide tenants and landlords on how to reach a mutual agreement on this debt. It clearly states that the debt should be repaid if it can be repaid, but importantly it states that both landlords and tenants should share the burden and negotiate. If an agreement cannot be reached, then binding arbitration will resolve the issue after March 2022.
"If you have rental debt caused by the pandemic, please try to discuss this with the landlord and share this code of conduct with him/her. Keep evidence of all communications, and notes from any meetings as these will be important evidence for the arbitrator should it reach arbitration."
Today’s announcement follows the Autumn Budget which included further measures to support commercial landlords and tenants. This includes reducing the burden of business rates in England by freezing the business rates multiplier for a further year – a tax cut worth £4.6 billion over 5 years – and introducing a 50% business rates discount for retail, hospitality, and leisure sectors in England.
To see the Code of Practice click here
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