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New law to resolve COVID-19 commercial rent debts

On the 24th of March 2022, the Commercial Rent (Coronavirus) Act 2022 received Royal Assent. This means in England and Wales, there will be a legally binding arbitration process for eligible commercial landlords and tenants who have not already reached an agreement to relive outstanding commercial rent debts relating to the pandemic.

The law applies to commercial rent debts of businesses that were mandated to close from 2020 until the restriction date, including businesses including gyms, pubs and restaurants. If the debts are accrued outside these times, they won’t be in the scope.

Code of Practice

The UK Government published in 2021 an updated Code of Practice to provide a straightforward process for settling outstanding debts for commercial landlords and tenants. If a tent can pay they rent debt in full, they should do so immediately. Tenants unable to pay in full should agree with their landlord with the expectation they can share the burden where they can and only as far as deemed necessary, allowing the tenant more time.

For tenants that have failed to reach an agreement within the Act’s scope, either one of the parties can apply for arbitration unilaterally, which will act as a backup. Parties are allowed to negotiate outside of the legal arbitration process. The code followed allows alternative dispute resolutions for tenants and landlords and can offer things such as mediations if they wish.

To apply for arbitrations, there’s a six-month window from the beginning of the legislation. Arbitrators may award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of 24 months.

The legal arbitration process is delivered by arbitrators nominated by authorised arbitration bodies from a list of appropriate and available arbitrators.

There will be an approval process that arbitrator’s bodies have to go through for the time to demonstrate their suitability.

The Department for Business, Energy and Industrial Strategy (BEIS) publish an index of approved arbitration bodies in due course. When a dispute is eligible, landlords or tenants can apply straight to any authorised arbitration body to appoint an arbitrator.

SOURCE: Propertymark

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