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Commercial Rent Arrears - Proposed new legislation

View profile for Susan Le-Sage
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On 16th June 2021, the Government confirmed that legislation would be introduced to "support the orderly resolution of rental payments accrued by commercial tenants during the pandemic". Essentially, this means that once the legislation is introduced, any debt accrued from March 2020 onwards will be ring fenced for tenants who have been detrimentally impacted by the coronavirus pandemic e.g. by virtue of business closures pending restrictions being removed for their particular business sector.

For commercial landlords, this means that there will be an obligation upon them to negotiate with tenants with a view to reaching a resolution in respect of any arrears that remain outstanding. In the event that this is unsuccessful, the parties will then have to engage in binding arbitration. A Code of Practice is due to be issued in relation to this new process, which is unlikely to be implemented until at least the end of this year/early next year.

This may be welcome news for some commercial landlords, however for others it will just be another burden. To put things into context, some commercial landlords have not received rental income for over a year, and are already limited in terms of the remedies that are currently available to them. In particular, on 4th August 2021 the existing moratorium on commercial forfeiture, CRAR and evictions was extended once again until 25th March 2022, leaving many commercial landlords stuck with non-paying tenants until such time as the legislation changes once again, with the only real viable remedy at the current time being court proceedings to recover arrears, or alternatively to obtain specific performance in respect of breach of covenant.

It is the "government’s expectation that landlords should share the financial burden with tenants where they are able to do so and give tenants breathing space to agree new terms, but also that tenants who can pay, should pay"​.​ There are certainly pros and cons to this approach; however what is clear is that things are going to remain difficult for commercial landlords for a significant period of time yet….

If you are a commercial landlord and would like further advice regarding any of the issues within this article, please contact the Dispute Resolution team on 01245493939 or callaghanm@gepp.co.uk

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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