Government set to further extend protections for commercial property tenants:
- Ban on forfeiture of commercial property leases to be extended to 25 March 2022;
- Restrictions upon Commercial Rent Arrears Recovery further extended;
- Restrictions on the service of statutory demands also extended to end September 2021;
- New binding arbitration process to resolve rent disputes between landlords and tenants.
Following the Government call for evidence which sought views from a broad range of stakeholders on how to move forward after the pandemic, legislation will be introduced to ringfence arrears that have accrued while a business has had to remain closed during the pandemic, the expectation being that landlords will make allowances against these arrears, and share the financial impact with their tenants.
The proposed new legislation is intended to help landlords and tenants reach agreement on how to handle the money owed, which could be done by waiving some of the total amount or agreeing a longer term repayment plan.
Where agreement cannot be reached the new legislation will ensure a binding arbitration process will be put in place so that both parties can come to a formal agreement. This will be a legally binding agreement that both parties must adhere to.
The press release states “In order to ensure landlords are protected, the government is making clear that businesses who are able to pay rent, must do so. Tenants should start paying their rent as soon as restrictions change, and they are given the green light to open.”
These further extensions apply to all commercial property leases, but the new legislation and arbitration process will only cover those impacted by closures. This means that rent debt accumulated before March 2020 and after the date when relevant sector restrictions on trading are lifted, will be actionable by landlords as soon as the tenant protection measures are lifted.
The arbitration process will be delivered by private arbitrators but in accordance with guidelines which will be set out in the proposed legislation, and they will have to go through an approval process to prove their impartiality.
Presumably the legislation will address the level of financial disclosure required, timescales, the procedural steps to be followed, and rules around who pays for the process. One also assumes the legislation will render worthless any attempt to seek judgment against tenants for unpaid rents touched by the legislation.
Further guidance will be issued once the legislation is available. In the meantime, feel free to contact any of the Property Disputes team: Lee Pearce, Joe Brightman, Molly Frankham, Amy Gibson or Rachel Bandrith.