The Commercial Rent (Coronavirus) Act 2022 introduced a legally binding arbitration process through which commercial landlords and tenants can resolve outstanding rent debts which have accrued during the COVID-19 pandemic. In practice, applications are being received by both landlords and tenants. In this insight, we explain how the process works and if you can benefit from it.

What kind of rent debt does the scheme cover?

The scheme applies to commercial rent debts that have been incurred by businesses which were forced to close for the period from March 2020 until the date that restrictions ended for their sector (known as protected rent debt). These include gyms, restaurants and non-essential retail.

Negotiations before using the scheme

In the first instance, landlords and tenants should negotiate to reach an agreement using the procedure set out in the Government’s Commercial Rent Code of Practice. Tenants who are able to pay their debt in full should do so; otherwise, landlords should try to share the burden.

Referrals need to be made by 23 September 2022

If an agreement cannot be reached, either party can refer the dispute to arbitration; the deadline for this is 23 September 2022. If a referral is not made by this deadline, and the deadline is not extended, the debt is no longer protected and landlords will be able to recover rent arrears in the normal manner.

Steps in the arbitration process

1. One party sends the other a letter notifying them of their intention to refer the dispute to arbitration. This letter must include a proposal to settle the dispute. Since you need to allow at least 28 days’ for a response, the notice must be sent no later than mid-August 2022 to ensure that you can make a referral to arbitration in advance of the cut-off date.
2. If an agreement is not reached following an exchange of offers, either party can refer the matter to arbitration. The process will be delivered by arbitrators appointed by seven approved arbitration bodies.
3. The arbitrator will make a decision which will be binding on both parties (this will either be made on the papers, or at a hearing if both parties request one). Arbitrators can award a reduction of protected rent debt and/or time to pay, with a maximum period of 24 months to repay the arrears.
   

How Capsticks can help

Capsticks brings together a team of expert litigators who deal with the issues you face on a daily basis. If you find yourself in conflict with another organisation or individual, you can rely on our technical skill in resolving complex legal disputes, using the most effective strategy based on your circumstances.

If your commercial tenants have failed to pay their rent as a result of the COVID -19 pandemic, the arbitration process offers a useful solution within a structured framework to engage a tenant. We can help you deal with rent arrears matters and always aim to reach an agreement at an early stage. Even if this is not possible, we can support you with the arbitration process and all steps up to the final award.

Please contact Abi Condry or Rachel Whale to find out more about how Capsticks can help.