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New laws and code to resolve remaining COVID-19 Commercial Property rent debts

New laws and a Code of Practice are being introduced to provide a legally-binding process to resolve the remaining commercial rent debts accrued because of the pandemic.

In brief:

  • A new Code of Practice published to guide landlords and tenants in how to negotiate a way forward
  • Changes will protect tenants from rent debt claims against them and help market return to normality
  • New laws and a Code of Practice are being introduced to resolve the remaining commercial property rent debts accrued because of the pandemic, Business Secretary Kwasi Kwarteng has announced on Tuesday 9 November 2021.

Commercial property tenants are protected from eviction until 25 March 2022, thanks to government action last year to provide firms with breathing space and help protect jobs when certain businesses had to close in full or in part during the pandemic. This provides time for landlords and tenants to negotiate how to share the cost of commercial property rent debts caused by the pandemic.

From today, these negotiations will be underpinned by a new Code of Practice, providing landlords and tenants with a clear process for settling outstanding debts before the new arbitration process comes into force.

The Code sets out that, in the first instance, 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.

From 25 March 2022, new laws introduced in the Commercial Rent (Coronavirus) Bill, being introduced in Parliament today, will establish a legally-binding arbitration process for commercial landlords and tenants who have not already reached an agreement, following the principles in the Code of Practice. Subject to Parliamentary passage, this will come into force next year.

The Bill will apply to commercial property rent debts related to the mandated closure of certain businesses such as pubs, gyms and restaurants during the pandemic. Debts accrued at other times will not be in scope.

These laws will come into force in England and Wales, and Northern Ireland will have a power in the Bill to introduce similar legislation.

The result of the arbitration process will be a legally-binding agreement the landlord and tenant must adhere to, resolving rent arrears disputes and helping the market return to normal as quickly as possible.

As of the 10th November 2021, the government is also protecting commercial property tenants from debt claims, including County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions, issued against them in relation to rent arrears accrued during the pandemic.

This measure will provide further protection to businesses which had to close and accumulated debts during the pandemic, while protections from forfeiture for business tenancies are in place under the Coronavirus Act 2020.

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