The government has today (4 August 2021) published a policy statement in respect of commercial rent debts. A link to the policy can be found below.
Much of the statement repeats previous publications issued by the government. However, some key points to note are as follows:
- The government has re-confirmed that the new arbitration system will only apply to commercial tenants who have been affected by COVID-19 business closures and only for the period during which the restrictions applied (the "ringfenced period").
- However, the arbitration process should be seen as a last resort. The government expects terms to be agreed between landlords and tenants impacted by closures to defer or waive entirely an appropriate proportion of those rent arrears. It is not yet clear what an "appropriate proportion" might mean.
- It is the government’s expectation that landlords should share the financial burden with tenants where they are able to do so and give tenants breathing space to agree new terms. However, tenants who can pay, should pay.
- Ahead of the arbitration system being in place, the government will publish the principles that they will seek to put into legislation, to allow landlords and tenants time to negotiate on that basis. They are encouraging all landlords and tenants to seek to agree mutually beneficial solutions as soon as possible.
- Once the new system is in place, landlords will be able to:
- exercise their rights to evict any tenant for the non-payment of rent incurred prior to March 2020 and from the end of the ringfenced period;
- evict any tenant who falls outside the scope of the arbitration legislation for non-payment of rent accrued at any time; and
- charge interest on rent incurred from the end of the ringfenced period onwards, if such interest payments are included in the terms of their lease.
- The government expects tenants and landlords to contribute to the cost of arbitration if both are found to have negotiated in good faith. However, if any party is found not to have negotiated in the spirit of the legislative principles, arbitrators may be empowered to grant the cost of arbitration as part of their decision.
- The government have also re-confirmed that, at this stage:
- forfeiture of commercial leases for non-payment of rent can take place after 25 March 2022
- winding-up petitions based on a statutory demand can be served after 30 September 2021
- the required amount of arrears for CRAR to be used now stands at 554 days’ rent until 25 March 2022, unless legislation is passed ahead of this.
The measures announced by government – the extension of current provisions, publication of a strengthened Code of Practice, and the development of a system of binding arbitration – triggers the start of a return to ‘business as usual’, by balancing protecting landlords and supporting those businesses most in need.