Moratorium to End on Commercial Arrears During the COVID-19 Pandemic

November 9, 2021 Advisory

On 9th November, Her Majesty’s Government issued a press release concerning proposed new laws and a code to resolve remaining COVID-19 commercial rent debts.

In the round, the proposals are set to provide a legally binding process by which landlords and tenants are to resolve commercial rent debts arising during the pandemic. Also, a new Code of Practice is launched by way of guidelines to landlords and tenants as to negotiating a way forward. In addition, the government will bring in measures to protect tenants from landlords taking action for rent debts – notably by using court debt proceedings. The objective is to return the market to a state of normality.

The moratorium on commercial rent arrears was extended until 25 March 2022, with the objective of giving tenants breathing space and a period of time during which landlords and tenants could negotiate a way forward on the arrears. The new Code of Practice will underpin those negotiations and provide a roadmap for settling outstanding debts.

As to the long-term position, on 9th November, the Commercial Rent (Coronavirus) Bill is being introduced into Parliament to establish new law from 25 March 2022 –  an arbitration process for landlords and tenants after they have exhausted the process outlined in the new Code of Practice. Subject to the Bill being passed through Parliament, which is likely, we will have a new law from next year dealing with commercial rent arrears accrued during the pandemic.

The government press release shows that at present the Bill will apply to commercial rent arrears arising from the closure of specific businesses (such as those in the hospitality sector) during the pandemic. The result of the arbitration process will compel the parties to a legally binding agreement on the arrears.

The press release goes on to outline that from 10th November, the government is to protect commercial tenants from County Court and High Court judgments for rental arrears accrued during the COVID-19 pandemic and also for bankruptcy petitions.

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