The Commercial Rent (Coronavirus) Act 2022
We have provided a number of articles over recent months about the various temporary measures which were introduced by the Corporate Insolvency and Governance Act 2020, which aimed to help companies affected by the lockdown restrictions during the pandemic.
Most of these measures expired at the end of June and September 2021, except for restrictions on winding up companies, which were extended until 31 March 2022.
Today sees the end of this restriction which will not be extended and see the insolvency regime to return to its pre-pandemic process.
Many clients will be concerned about commercial rent debts which have accrued because of the pandemic.
A new law is now in place to help resolve certain remaining commercial rent debts accrued because of the pandemic.
The ‘Commercial Rent (Coronavirus) Act 2022’ received Royal Assent on the 24 March 2022. This introduces a legally binding arbitration process available for commercial landlords and tenants who have not already reached an agreement to deal with commercial rent debts. Its purposes is to resolve disputes about pandemic related rent debt and help the market return to normal as quickly as possible.
The law applies to commercial rent debts in respect of unpaid rent arrears relating to the ring-fenced period, of business tenants which:
- Were mandated to close their premises or business (in whole or in part, including with exceptions such as non-essential shops being allowed to open for collections) under regulations made under the Public Health (Control of Disease) Act 1984 during the COVID-19 pandemic; and
- Lease their premises under a business tenancy, as defined by Part II of the Landlord and Tenant Act 1954; that is, a tenancy under which premises are occupied by the tenant for business purposes (or business and other purposes)
The ‘Commercial Rent (Coronavirus) Act’ applies to England and Wales and for those tenancies that fall within scope of the Act and have failed to reach agreement, either party can apply for arbitration, as a backstop after negotiations have failed.
There is a strict window to apply for arbitration which is six months from the date legislation comes into force. 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 will be delivered by arbitrators appointed by approved arbitration bodies from a list of suitable and available arbitrators.
The new legislation provides for:
- A claim for a county court judgement or high court judgement, made between 10 November 2021 and commencement of the Bill and including debt within the scope of the Commercial Rent (Coronavirus) Bill, to be eligible for arbitration under the process in the Bill. The Bill will prevent issue of debt claims including ringfenced debt from commencement until the end of the arbitration application period or the arbitration process.
- A petition for bankruptcy relating to debts within the scope of the Commercial Rent (Coronavirus) Bill where the statutory demand or claim on which the petition is based was issued between the 10 November 2021 and commencement of the Bill will be effectively void, and any order made relying on such petitions would also be void. The Court will have power to restore the debtor to which the petition or order relates, to the position it was in immediately before the petition was presented. The Bill will prevent a landlord from petitioning for bankruptcy of a business tenant such as a sole trader, based on non-payment of a statutory demand relating to any ringfenced debt served on or after 10 November 2021 and before the Bill comes into force. It will also prevent a petition based on a judgment debt if the claim was issued in this period.