On March 24th 2022 the Commercial Rent (Coronavirus) Act 2022 (the Act) received Royal Assent.
The scope of the Act is to create provisions enabling relief from payment of Protected Rent Debts under a business tenancy.
| When does the Act apply?
The Commercial Rent (Coronavirus) Act 2022 applies to Commercial Properties that fall under the definition of a business tenancy under Part 2 of the Landlord and Tenant Act 1954
The Act imposes a concept of ‘Protected Rent Debts’ and applies where a business tenancy became adversely affected by the pandemic and the rent arrears were attributable to a period of occupation within the Protected Period.
| Breaking down the key terms
‘Protected Rent Debts’ The Act defines Protected Rent Debts as rent due under the tenancy, service charge payments due under the tenancy (including VAT) and any interest due on the unpaid amounts, during the protected period.
‘Adversely Affected by Coronavirus’ means the whole or part of the business carried on by the tenant at or from the premises, or the whole or part of the premises and the premises was subject to a closure requirement.
‘Protected Period’ means from 21 March 2020 to 18 July 2021 or the last day on which the business or premises was subject to a closure requirement or a specific coronavirus restriction. However, this may vary depending on the type of business that was carried out from the premises, for example nightclubs and hospitality.
| What does the Act do?
The Act creates a further moratorium period of six months suspending a landlord’s usual remedies for rent arrears.
The six-month period will begin from the 24th March 2022 and will restrict the Landlord from exercising some remedies with regards to rent debt, such as:
- Debt recovery proceedings;
- Commercial Rent Arrears Recovery (CRAR);
- Drawing down on a rent deposit (in the event a drawdown occurred before the Act was passed, any obligation on a tenant to top up the rent deposit is suspended);
- Presenting a winding up petition against a company tenant (but note this only applies if all of the arrears are protected rent debt); and
- Presenting a bankruptcy petition against an individual tenant.
As well as the above restrictions the Act has created a new binding arbitration scheme (Part 2) to allow the Landlord and Tenant to have the matter determined without reference to the court. A referral to the arbitration scheme must be made within the moratorium period, otherwise the remedies listed above become available at the end of the Moratorium Period on 24 September 2022.
The Act does not affect a Landlord’s ability to claim arrears if court proceedings were commenced for the arrears before 10 November 2021. Additionally, the Act does not apply to arrears falling outside of the protected period, which can be pursued by landlords in the usual way.
If court proceedings were commenced on or after 10 November 2021 but before 24 March 2022, either party to those proceedings can apply for a stay to enable the matter to be resolved by the arbitration scheme and the court must grant the stay if the claims are not concluded.
As the Act is still extremely new it remains to be seen the extent that the Arbitration Scheme will assist Landlords and Tenants who were affected by the Coronavirus Pandemic.
If you have any queries regarding commercial rent arrears, we can help. Contact our commercial property disputes team today on 0800 988 7756.