Top 10 points about the Commercial Rent (Coronavirus) Act 2022
Property Litigation Partner, Jonathan Ross, summarises the top 10 key takeaways from the launch of the Commercial Rent (Coronavirus) Act 2022.
- It will come into effect on 25 March 2022 when the general moratorium on commercial rent enforcement comes to an end. It is intended to protect retail, hospitality, and leisure tenants whose businesses have been made precarious by having to close during the pandemic.
- It will apply to ring-fenced arrears under business tenancies- being sums still outstanding relating to any period of forced closure of the tenant's business.
- It provides for an Arbitration process to resolve disputes as to the ability of the tenant to pay ring-fenced arrears. In this regard, the Arbitrator cannot have regard to the ability of the tenant to borrow funds or rely upon a Guarantor- but can look at the financial position of the whole Group if the tenant is a subsidiary.
- The Arbitration process will not apply where the landlord and tenant have reached agreement as to payment of such arrears already.
- It's purpose is to allow tenants to continue trading where a reduction or deferral of the arrears will allow their business to remain viable.
- The default position is that a tenant should pay the arrears where it can afford to do so.
- The Arbitrator will take into account the solvency of the landlord when determining whether to write off or defer payment of the whole or any part of the arrears.
- If the dispute is to be arbitrated, the reference to Arbitration has to be made within 6 months i.e. by 25 September 2022.
- No enforcement action can be instituted as to ring-fenced arrears for the initial 6 months or until the Arbitration process is determined.
- Each party is to pay their own costs of any Arbitration- which may be substantial given that the outcome will depend heavily on a detailed analysis of the financial position of the tenant and, in some cases, the landlord as well.
The Commercial Rent (Coronavirus) Bill is being finalised in Parliament and should receive Royal Assent by the next quarter day, 25 March 2022. The Act will be called the Commercial Rent (Coronavirus) Act 2022.