All change for commercial rents in England

28th March 2022, 2:10 pm

For two years landlords of commercial leases have been unable to use forfeiture or CRAR to recover unpaid rent. From 25 March 2022 those restrictions fall away so the pre-pandemic rules will apply once more for all bar arrears for the period from 21 March 2020 to 18 July 2021 in certain sectors.

Landlords of commercial premises in England will be able to use CRAR once rent has been unpaid for 7 days and to exercise the right of re-entry in accordance with the lease terms. This will apply to quarterly rents due in September and December 2021 as well as the March 2022 and subsequent quarters. Landlords wanting to forfeit must be careful not to waive the right to forfeit from now on. Restrictions on the use of statutory demands continue for now, but are expected to end on 1 April 2022.

Arrears which accrued while a business was forced by government regulations to close are subject to a different system. The Commercial Rent (Coronavirus) Act 2022 came into force on 24 March 2022 and places a moratorium on action for “protected rent debts” to enable a reference to arbitration to decide how much rent should be paid by businesses which had to close for the period of enforced closure. This system largely applies to the retail, leisure and hospitality sectors. A full list of the businesses affected and the closure dates to which the moratorium applies can be found in the Code of Practice for Commercial Property Relationships following the COVID-19 pandemic.

Parties with unpaid protected rent debts have a 6 month period in which to ask an arbitrator to determine how much, if any, rent should be paid and whether payment can be spread over a period of up to 24 months. There is a requirement to write to the other party giving notice of an intention to apply for arbitration and then to wait for 28 days, or 14 days after a response is received if sooner, before commencing the arbitration. Proposals submitted in the arbitration must be verified by a statement of truth and supported by evidence and submitted in accordance with a strict timetable. The arbitrator must dismiss the application if the tenant’s business would not be viable even if relief from payment of some or all of the rent debt is given. Otherwise the arbitrator must make a determination according to whose proposal most closely meets with the requirements/objectives of the scheme.

The moratorium on protected rent debts applies for 6 months, unless there is a reference to arbitration, in which case the moratorium ends when the arbitration concludes. During the moratorium no action can be taken to recover the protected rent debt by CRAR, forfeiture, court proceedings or statutory demand.

The Welsh government has chosen to continue the COVID restrictions on forfeiture and CRAR until 24 September. The arbitration scheme for protected rent debts will also run in Wales for that period.

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