Tenants and Landlords now face legally binding arbitration over rent arrear disputes
Posted on 31st January 2022 at 13:51
Businesses shut during the pandemic are currently protected from eviction up until March 25. A new government bill currently brought before Parliament is expected to create binding arbitration following this date.
Code of Practice
In November 2021, MP Kwasi Kwarteng announced The Commercial Rent (Coronavirus) Bill, alongside a Code of Practice which helps prevent commercial tenants in arrears from being evicted. The purpose of these programmes is to encourage a form of negotiation from landlords and tenants concerning these arrears and to share the cost of commercial rent debts caused by closures during the COVID-19 lockdown.
Within the Code of Practice landlords and tenants are given an outline on how to settle outstanding debts. After March 25 any ongoing disputes may be resolved by binding arbitration if the Bill successfully passes through Parliament.
Furthermore, debts accumulated by hospitality and sports venues such as gyms, restaurants and pubs will be within the scope of the legislation. Any other debts accumulated that are not as a result of the COVID Pandemic (e.g such as the voluntary closure of a business) will be excluded from this new legislation.
Protection from legal action will end
The current legislation has protected tenants against County Court Judgements, High Court Judgements and bankruptcy petitions issued against them due to rent arrears accruing during the pandemic.
However, if no agreement can be reached, then either the tenant or landlord can unilaterally apply for arbitration. The arbitration can be applied for within six months of the legislation coming into force with the tenant expected to repay the final agreed amount within 24 months.
Business Secretary Kwasi Kwarteng said at the launch: “We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”
Economic recovery is key
Kate Nicholls OBE, CEO of UK Hospitality, said: “It is in the long-term interests of landlords and tenants to come together and find solutions that ensure business survival and that do not undermine the economic recovery.
“We share government’s view that arbitration should be a last resort and this process must take into account the exceptional and existential level of pain that hospitality businesses have faced over the last 18 months. It must not impact this industry’s ability to rapidly recover and create jobs throughout the country.”
However, while Helen Dickinson OBE, Chief Executive of the British Retail Consortium, supports the principle of arbitration, she said the “devil will be in the detail on issues around what tenant viability really means in practice and the power of arbitrators”.
She added: “We will engage closely and constructively with government to help ensure their proposals protect otherwise viable businesses, secure the recovery, and protect jobs.”
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