The Commercial Rent (Coronavirus) Act 2022 - Ring Fencing Your Arrears

Following the outbreak of coronavirus, the government has enacted legislation with the aim to help those that have been affected. The most recent piece of legislation is the Commercial Rent (Coronavirus) Act 2022 (the “Act”) which was passed on 24 March 2022 and came into force immediately. In addition, existing restrictions implemented as a result of the coronavirus pandemic to restrict landlords from forfeiting leases and exercising Commercial Rent Arrears Recovery (CRAR) ended on 25 March 2022.

Prior to its passing, the purpose of the proposed legislation was described in the explanatory notes of the Commercial Rent (Coronavirus) Bill as follows:

“The purpose of the Commercial Rent (Coronavirus) Bill is to support landlords and tenants in resolving disputes relating to rent owed by businesses which were required to close during the COVID-19 pandemic.”

As a result of the Act, arrears of rent (and other sums) accrued by tenants during part of the coronavirus pandemic that were forced by the government to close will be ring-fenced. The Act gives an option to landlords and tenants who cannot agree on how to deal with these ring-fenced arrears to refer the matter to an arbitrator by 24 September 2022. The government does however have the power to extend this period.

If referred to an arbitrator, the arbitrator’s decision to write off all or part of the debt, or to give the tenant more time to pay the debt (up to a total of 24 months) will be final and binding on the parties. To come to their decision an arbitrator has to consider the landlord’s solvency and tenant’s viability and affordability, the idea of the government is to try to balance the interests of a landlord as well as their tenant. Whilst a decision is final, either party can appeal or challenge an award made under the Act within 28 days on either jurisdictional or irregularity grounds. In addition, either party can appeal to the court on a question of law arising from the award.

The Act also means that all landlords’ remedies to recover these ring-fenced arrears will be restricted during the arbitration process or until the time for referring a matter to arbitration has passed.

Whilst most landlords and tenants have come to amicable arrangements with regard to any rent due and arrears accrued, the Act does provide an option for landlords and tenants who cannot resolve their differences to refer the matter to an arbitrator. Only time will tell what uptake there is and how arbitrators interpret the Act.   

Since the coronavirus pandemic, our Property Litigation team has advised landlords, tenants and receivers on their options and assisted in agreements that have been reached. It is important for landlords and tenants to take appropriate legal advice and be prepared. If you wish to discuss your circumstances and what options are available to you please do not hesitate to contact Jonathan Flynn by email at Jonathan.Flynn@jcpsolicitors.co.uk.