Throughout the pandemic the government afforded commercial tenants breathing space from eviction through implementing various mechanisms which restrained landlords from taking action.

They include the following:-

  • The introduction of Coronavirus Act 2020 created a temporary moratorium preventing eviction or forfeiture of commercial leases for non-payment of rent. This moratorium has been extended until 25 March 2022 in England and Wales and 30 September 2021 in Northern Ireland.
  • The voluntary ‘Code of Practice for Landlords and Tenants of Commercial Property’ was designed to encourage landlords and tenants to negotiate rent arrears which occurred as a result of the pandemic.
  • The Corporate Insolvency and Governance Act 2020 also restricted commercial landlords on issuing statutory demands and winding up petitions until 30 September 2021.

New government guidance

With the easing of restrictions, shops and restaurants opening and people starting to return to work, many landlords were looking forward to getting their affairs in order and for the rent arrears to be addressed. However, it would appear that this may not be the case as on 4 August 2021, the government issued a policy paper called ‘Supporting businesses with commercial rent debts: policy statement’.

This paper outlines the government intention to legislate to ringfence rent debt stemming from the pandemic by businesses affected by enforced closures. The paper encourages talks to take place between the commercial landlord and tenant and for negotiations to take place in the hope that terms will be agreed to possibly defer or waive a proportion of the accumulated rent arrears. If negotiations are not successful, the parties will be forced to participate in a process of binding arbitration. This is intended to be used only as a last resort and the aim of this process is for a straightforward resolution to be reached by avoiding the need for court intervention.

The government expects both parties to participate towards the costs of arbitration if both parties have acted in good faith. However, there is a risk that if one party is found not to have acted in good faith or negotiated in accordance with the principles an arbitrator may award costs against the defaulting party.

Points to note

It is important to note however that the new legislation will only apply to debt impacted by COVID19 business closures and that the protection measures will only apply to ringfenced arrears. Therefore, landlords can still evict commercial tenants for non-payment of rent outside of the defined ‘ringfenced arrears’.

Notwithstanding the extensions granted under the Coronavirus Act 2020 and The Corporate Insolvency and Governance Act 2020, together with the new legislation intended to come into force, commercial landlords still have a number of remedies and options available to them including debt proceedings or drawing upon funds held in a rent deposit.