Reed Smith Client Alerts

Following our alert on the press release by the Business Secretary on 9 November 2021 we now have sight of the Commercial Rent (Coronavirus) Bill. The Bill is expected to be passed into law by 25 March 2022. It will apply specifically to protected rent debts - those rent debts incurred during periods of a tenant’s enforced closure between 21.3.20 and 18.7.21 (7.8.21 Wales). The new Code of Practice, also published, provides guidance on which periods qualify as protected for different business sectors. The Bill and the Code also provide more detail on the proposed binding arbitration process expected to come into force on 25 March 2022.

In short, either party will be able to notify the other of their intention to refer the issue of a protected rent debt to an arbitrator within 6 months of the Bill becoming law, although arbitration can’t be used if the tenant is in a CVA, an IVA or an arrangement. The party applying must propose a resolution by way of relief from payment and the other party may also make a counterproposal. The arbitrator can dismiss the application if it appears the parties had effectively resolved the matter of relief before the reference was made (so you can’t have a second bite of the cherry). He can also dismiss if the tenant’s business is not viable even if relief were to be given. Otherwise, he will consider whether to grant relief and what that relief should be, subject to a maximum timeframe of 24 months for repayment of the debt. His award will be binding and is aimed at preserving the viability of the tenant’s business so far as that is consistent with preserving the landlord’s solvency (disregarding in each case the possibility of borrowing or restructuring). The overriding objective is that tenants should meet their obligations to pay rent in full without delay where possible.

Importantly, the Bill introduces a moratorium, effective in two parts:

From the date when the bill becomes law until the last date on which a claim could have been referred to arbitration (if it was not referred) or the date on which an arbitration was concluded, landlords will not be able to:

  • Issue a claim in court for a protected rent debt;
  • Use CRAR for the debt;
  • Forfeit for the debt;
  • Use a rent deposit for the debt and, if a rent deposit was used before the moratorium period to pay a protected rent debt, the tenant is not required to make good any shortfall before the end of the moratorium;
  • Wind up a tenant for the debt.

A claim issued for a protected rent debt between 10 November 2021 and the date on which the bill is passed, can be stayed at the request of either party in order for it to be resolved outside court. Upon such application, the court must order a stay.