April 5, 2022
By Siôn Fôn
The general moratorium has been replaced by the Commercial Rent (Coronavirus) Act 2022 (“the Act”), which is intended to promote the amicable resolution of disputes between landlords and tenants regarding lockdown related arrears.
Key features of the Act include:
Landlords of commercial premises in England are once again capable of forfeiting the lease, provided their tenant’s arrears (including rent, service charge, insurance arrears and interest) are not ‘protected rent debts’ (“PRDs”).
For arrears to qualify as PRDs, the tenant’s business must have been (a) subject to a legally enforceable closure between 21 March 2020 and 18 July 2021 (in England) or 7 August 2021 (in Wales); and (b) the arrears must have accrued within the ‘protected period’, which is from 21 March 2020 to the last day on which the tenant was subject to an enforced closure or a specific Covid related restriction imposed by the Government.
Under the Act, landlords remain unable to forfeit the lease if their tenant’s arrears qualify as PRDs. However, if arrears pre-date 21 March 2020 or post-date 18 July 2021 (in England) or 7 August 2021 (in Wales), or if the arrears were accrued by a business that wasn’t affected by a Government enforced lockdown (for example pharmacies, which were allowed to remain open), then forfeiture proceedings may once again be commenced by commercial landlords in England.
The creation of a new arbitration process to resolve disputes where the landlord and tenant have been unable to reach an agreement themselves on payment of arrears which accrued during the protected period. The arbitrator will consider the tenant’s accounting documentation and assess the viability of the tenant’s business to determine whether some or all of the debt should be written off or deferred to enable the tenant’s business to remain afloat.
Arbitration under the Act must be commenced by 25 September 2022 by serving notice on the other party to the lease of the intention to refer the dispute to an arbitrator. The landlord will be unable to commence enforcement action to recover a PRD until 25 September 2022 or, if later, until arbitration is concluded.
It is important to note, however, that the law differs between England and Wales with regards to forfeiture further to a recent Welsh Government announcement. An article discussing the differences in the law in Wales can be found here.
If you are a landlord or a tenant of commercial premises in England and require advice on your rights and obligations, please get in touch with Siôn Fôn now on 029 2082 9107 for an initial free, no obligation chat.
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