Government has announced that new laws and a new Code of Practice is to be published to guide landlords and tenants in how to negotiate a way forward. The changes will “protect tenants from rent debt claims against them and help market return to normality”.
Commercial tenants are protected from eviction until 25 March 2022, as government action last year provided firms with breathing space. This “provides time for landlords and tenants to negotiate how to share the cost of commercial rent debts caused by the pandemic”.
From 9 November, 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 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, leisure centres 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 a 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. 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 rent arrears accrued during the pandemic.
This measure will provide further protection to businesses which 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: “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.”
Read the full press release here.