In a sudden move, the Government is publishing a new Code of Practice today (9 November 2021) for resolving disputes relating to commercial rent arrears built up during the pandemic where landlords and tenants cannot reach an agreement. The legislation, which will also be published later today, will set out a binding arbitration process to resolve such disputes.
The full details will be published shortly but for now the headline points are:
- The original voluntary code of practice encouraging negotiations will be replaced by the new binding code of practice.
- The new code and arbitration scheme will apply to tenants that were forced to close (in full or in part) during the pandemic. It will only apply to arrears that accrued while the tenant was subject to restrictions in trading during the pandemic. No details have been announced excluding tenants with large turnovers from the code or scheme.
- The Government is clear that landlords and tenants should continue to negotiate to try and reach amicable solutions. It is anticipated that landlords will be encouraged to waive some or all of the rent arrears where they are able to.
- The arbitration process will be a legally binding process, effective from 25 March 2022, resulting in binding agreements which resolve outstanding arrears disputes. Either the landlord or tenant will be able to unilaterally start the arbitration process for up to 6 months after the legislation is in place.
- The code and arbitration scheme will provide protection to tenants from debt claims through the Court. Details of what the immediate effect is on existing judgments, live proceedings and pending appeals are awaited but any interference in those proceedings is likely to be controversial, particularly given the Government's previous repeated message that any tenant who could pay the arrears should pay.
The latest announcement can be found here (https://www.gov.uk/government/news/new-laws-and-code-to-resolve-remaining-covid-19-commercial-rent-debts). A full update will follow in due course when more details are known.
The publication of an updated Code of Practice is a clear signal and framework for the minority who have not yet done so, to come together, reach agreement and look to the future.