New law introduced to solve Covid Commercial Rent arrears

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new law for covid commercial rent arrears

Business Minister Paul Scully has announced the launch of a new law to help resolve remaining commercial rent debts accrued because of the pandemic.

The ‘Commercial Rent (Coronavirus) Act 2022’ received Royal Assent means that a legally binding arbitration process will be available for eligible commercial landlords and tenants who have not already reached an agreement. This will resolve disputes about certain pandemic-related rent debt collection and help the market return to normal as quickly as possible.

The law applies to the collection of commercial rent arrears of businesses including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be in scope.

The law comes into force in England and Wales.

Business Minister Paul Scully said “This new law will give commercial tenants and landlords the ability to draw a line under the uncertainty caused by the pandemic so they can plan ahead and return to normality.”

“Landlords and tenants should keep working together to reach their own agreements where possible using our Code of Practice to help them, and we’ve made arbitration available as a last resort. Tenants who can repay their rent debts in full, should do so, and when they cannot, landlords should try to share the burden, so we can all move on.”

The government encourages commercial landlords and tenants to negotiate their own agreement where possible, so that an arrangement to resolve debt is mutually agreed, instead of resorting to the arbitration process.

Thursday 24th March was the last day of the general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales, but eligible firms remain protected for the next 6 months during which arbitration can be applied for or until the conclusion of an arbitration.

The moratorium has provided firms with breathing space to negotiate how to address the cost of commercial rent arrears caused by the pandemic before the new law came into place.

Last year, the government published an updated Code of Practice to provide commercial landlords and tenants with a clear process for settling outstanding debts. The Code sets out that tenants who can pay their rent debt in full should do so, and that in the first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord shares the burden where they are able to do so, and only as far as necessary, by waiving some or all rent arrears or giving time to pay.

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