What is The Commercial Rent (Coronavirus) Act 2022 (the “Act”)?
The Act replaces section 82 of the Coronavirus Act 2020 which previously imposed restrictions on commercial landlords in respect of rent arrears recovery and forfeiture of leases.
This now provides commercial landlords with welcome relief on recovering rent arrears, forfeiture and Commercial Rent Arrears Recovery (CRAR). However, when the rent arrears accrued is critical, as Protected Rent will be ringfenced so that these remedies are still not available.
Protected Rent Arrears
Protected Rent Arrears are arrears that accrued under a business tenancy in a period when the Government forced premises to close and/or businesses to cease trading during the lockdowns due to the pandemic. The relevant period in England is 21 March 2020 to the earlier of the last day the business/premises was required to close (or was subject to regulation on trading and use), or 18 July 2021 (and extends to 07 August 2021 in Wales).
It is critical to ensure a commercial landlord knows whether the rent arrears are Protected or not as this considerably changes the remedies available to them.
I’m a landlord and my tenant has Protected Rent Arrears. What can I do?
Following the implementation of the Act, there will be a 6-month moratorium (or a ‘freeze’) preventing a commercial landlord from recovering Protected Rent Arrears, forfeiting a lease or using Commercial Rent Arrears Recovery for Protected Rent.
During this period, a landlord can:
- Reach an agreement with the tenant on settlement of the rent arrears; or
- Either the landlord or the tenant can refer the matter to arbitration where no agreement can be reached.
Any other action taken by the landlord to enforce the debt is likely to be invalid or stayed.
If the matter is referred to arbitration, there is a strict process to follow. If a tenant wishes to arbitrate, they must ensure the matter is referred to the arbitrator within 6-months following the implementation of the Act. This could, however, be extended.
What rights does a landlord have under The Act?
With the exception of Protected Rent Arrears, commercial landlords will now have the following remedies available to them again:
- Winding-up Petition: available from 1 April 2022 where a debt is greater than £750
- Commercial Rent Arrears Recovery (CRAR): available where there is 7 days of rent arrears.
- Forfeiture: available to landlords for payment of non-payment of rent arrears.
The above remedies are not available for Protected Rent Arrears.
Can a landlord issue court proceedings for recovery?
If court proceedings were already issued before 10 November 2021, a landlord is entitled to continue with the proceedings. However, in respect of Protected Rent Arrears, and any proceedings issued on or after 10 November 2021, the tenant has the right to have the proceedings stayed pending arbitration.