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Commercial Rent (Coronavirus) Act 2022

Published: 16 May 2022

Commercial Rent (Coronavirus) Act 2022 – are the outstanding arrears a protected rent debt?

After two years, the restrictions introduced in March 2020 against what enforcement action a commercial landlord can take against a non-paying tenant, have now been lifted.  As such, commercial landlords are generally now able to exercise the same remedies for non-payment of rent as they did prior to March 2020.

This is, however, subject to whether the debt is one to which the Commercial Rent (Coronavirus) Act 2022 ("the Act") applies.  The Act, which came into force on 24 March 2022, temporarily prohibits a landlord taking action against a tenant for non-payment of rent, if such rent is identified as being a protected rent debt.

The parties are instead encouraged to resolve any outstanding dispute between themselves, or refer the matter to an arbitration scheme introduced by the Act.

What is a protected rent debt?

A protected rent debt is one that is ringfenced under the Act as being any unpaid rent due to the landlord, including service charges, VAT, interest and insurance.  The sums must have been incurred within a protected period during which the tenant's business was adversely affected by coronavirus, by way of enforced closure (whether fully or partly), and/or subject to specific restrictions.

The protected period would fall between 21 March 2020 and 18 July 2021 in England, and between 21 March 2020 and 7 August 2021 in Wales, so long as the relevant sums owed by the tenant's business were incurred during a period in which the tenant's business was affected.

Which business tenancies does the Act apply to?

The Act applies to business tenancies being those to which Part 2 of the Landlord and Tenant Act 1954 applies.  This includes commercial leases (whether protected by the Landlord and Tenant Act 1954 or not), underleases, tenancies by estoppel, and periodic tenancies (whether express or implied).

Arbitration

Whilst commercial landlords and tenants are encouraged to continue to settle their own disputes, where an agreement has yet to be reached, either party can now refer the matter to the new arbitration scheme.

The referral must be made within six months of the Act coming into force on 24 March 2022 i.e. by no later than 23 September 2022 (albeit the government may extend this date).

Once established that the debt is a protected rent debt pursuant to the Act, and in consideration of the evidence submitted by the parties, the arbitrator will make a legally binding decision as to the payment of that protected rent debt.

In doing so, the arbitrator will have regard to both the preservation of the tenant's business should the debt be awarded as payable, and the preservation of the landlord's solvency if those arrears are deemed unpayable.

Moratorium

The Act introduces a new moratorium period which begins on 24 March 2022, and which ends after 23 September 2022.  During such time, a commercial landlord is restricted from taking enforcement action against a non-paying tenant if the monies sought are that of a protected rent debt.  The landlord cannot issue a debt claim at Court, forfeit a lease, initiate the Commercial Rent Arrears Recovery process, nor issue winding-up or bankruptcy petitions.

The moratorium period shall end earlier than 23 September 2022, should any matter referred to arbitration, also conclude within the moratorium period.

We would advise any commercial landlord or tenant who is unsure as to whether the Act applies to an unpaid debt, to seek legal advice before commencing any steps towards enforcement action, or upon any action being taken against them in respect of it.

If you would like to discuss any current outstanding rent due or owing in accordance with a business tenancy, please do not hesitate to contact a member of our Litigation Department on 01332 600005.