Commercial Rent Arrears – Changes Ahead?

Commercial tenants who’ve fallen behind with their rent are currently protected from eviction until 25 March 2022.

Recently, the Government published the Commercial Rent (Coronavirus) Bill together with a new Code of Practice setting out how rent arrears accumulated during the pandemic are to be dealt after the 25 March 2022. The Government hope to make this law by March 2022 although it isn’t in force yet/could change before then.  

Key Features of the Bill and the Code of Practice (in its current form):  

It does not apply to all commercial premises. It only applies to arrears accrued by businesses which were forced to close (fully or in part) by the lockdown restrictions for the period they were subject to those restrictions. Where it applies:

  • It provides a legally binding process to resolve rent arrears. However, Landlords and tenants are encouraged to negotiate first before resorting to arbitration. Where landlord and tenants have already made agreements about arrears, then those agreements should continue to be honoured.
  • The Code of Practice states that tenants who can pay their rent debt should do so. However, there is an expectation that, where tenants can’t pay their rent debt in full, landlords should share the burden with their tenants.
  • Rent arrears include interest on late payments, insurance rent, service charge and VAT as well as annual rent arrears.
  • It will temporarily protect tenants from landlords making debt claims and bankruptcy or winding up petitions in respect of arrears built up during the pandemic or from using the commercial rent arrears recovery power.
  • It will temporarily prevent landlords from using rent deposits to recover rent arrears. Where a landlord has already made a withdrawal from a rent deposit, the requirement for a tenant to top-up the deposit is also temporarily suspended.
  • It will give tenants up to 24 months to repay their arrears.
  • Landlords and tenants will have 6 months from when the legislation comes in to apply for arbitration.

Our experienced Commercial Property team are here to help with all aspects of commercial leases – please contact our offices if you would like any assistance.

Alison Munro