Commercial rent arrears

Many tenants of commercial premises were devastated by the pandemic closures. A closed business meant no income which for many resulted in rent arrears. The government put in a number of protections during the pandemic to try to ease the position including a moratorium on commercial eviction. These protections have now been removed.

However, many commercial tenants still have rent arrears built up during the pandemic and the government has introduced the Commercial Rent (Coronavirus) Act 2022 (CRCA) to try to help. The CRCA law applies to commercial rent debts of businesses including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be within the scope of the Act.

The Act sets up a legally binding arbitration process for eligible commercial landlords and tenants who have not already reached an agreement. The aim is to resolve disputes about certain pandemic-related rent debt.

It should be noted that the window to apply for arbitration will be six months from the date legislation comes into force. 

The government has introduced a Code of Practice to provide commercial landlords and tenants with a clear process for settling outstanding debts. The Code sets out that tenants who can pay their rent debt in full should do so, and that in the first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord shares the burden where they are able to do so, and only as far as necessary, by waiving some or all rent arrears or giving time to pay.

The government continues to encourage commercial landlords and tenants to negotiate their own agreement where possible, so that an arrangement to resolve debt is mutually agreed, instead of resorting to the arbitration process. Given the relatively short time frame to apply for the arbitration process and concerns in the market about the availability of arbitrators, affected parties should take specialist advice as soon as possible to preserve their position.

To discuss this or any other landlord and tenant matter, contact us.

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