Reed Smith News Flashes

Business Secretary Kwasi Kwarteng has announced that ongoing negotiations between landlords and tenants will now be underpinned by the new Code, which is designed to provide landlords and tenants with a clear process for settling outstanding debts before the much-heralded arbitration process comes into force. How clear that process is remains to be seen.  All we know so far is that tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord waives some or all rent arrears where they are able to do so. So far nothing new and at first sight, this looks unlikely to have any more impact than the first Code of Practice introduced in June last year.

Perhaps of more interest, the Commercial Rent (Coronavirus) Bill, introduced into Parliament on 9 November 2021, is expected to bring in, from 25 March 2022, the legally-binding arbitration process for commercial landlords and tenants who have not reached an agreement on rent debts specifically related to periods of forced closure of certain businesses, including pubs, gyms and restaurants.***  However, there has still been no detail as to how the process will work, other than that either party will be able to apply for a private arbitrator (from an approved list) to be appointed following the failure of negotiations and it looks as though parties may be able to opt for mediation if they prefer. The window to apply for arbitration will be 6 months from the date the legislation comes into force, with a maximum timeframe to repay the rent debt of 24 months.

The press release also mentions protecting commercial tenants from debt claims, including County Court Judgments, High Court Judgments and bankruptcy petitions issued against them in relation to rent arrears accrued during the pandemic. It will be interesting to see how this will operate in relation to judgments already obtained. A footnote to the press release suggesting that CCJs can be considered within the arbitration process is worrying if it seeks to undermine a duly followed legal process.***

***We have now seen the Commercial Rent (Coronavirus) Bill and will be providing further detail on that shortly.

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