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Rent Moratorium and The Commercial Rent (Coronavirus) Act 2022

Currently there’s an estimated £7.5bn in rent arrears due to landlords across the commercial real estate sector. The lease forfeiture moratorium, which protected commercial businesses from eviction during the pandemic, has now expired. Rent, service charges, interest, insurance rent and top-up deposits need to be paid. But what does this really mean for our independent business venues up and down the country?

Well, there is some good news. The rent moratorium may have ended, but it’s been replaced by a new law to help resolve outstanding rent debts. The Commercial Rent (Coronavirus) Act 2022 means that there is now a legally binding arbitration process in place to ensure that commercial landlords and tenants who have not already reached an agreement will still be able to do so.

The law applies to ring-fenced rent arrears of businesses including pubs and restaurants which were mandated to close during the Covid-19 restrictions. It’s hoped that this new law will encourage a more collaborative and cooperative relationship between landlords, retailers and restaurateurs and allow them to move forward following the expiry of the lease forfeiture moratorium last week.

A new Code of Practise was published last year to provide commercial landlords and tenants with a clear process for settling outstanding debts, and if landlords and commercial tenants are able to form new rent agreements together, it’s unlikely to cause widespread damage to businesses across the UK. While the moratorium has ended, eligible firms remain protected for the next six months during which arbitration can be applied for, however it’s hoped that most will be able to find a solution so that an arrangement to resolve debt is mutually agreed, instead of resorting to the arbitration process.

However it’s important to be aware of the changes that are now in place, as not all rent arrears will be protected under the new law.

Arrears including rent, service charges, insurance rent, interest or VAT accrued by businesses that were required to close during the pandemic will only remain a ‘protected rent debt’ providing they were accrued between 21 March 2020 and the date the specific coronavirus restrictions affecting the relevant business finally ended. For England this period is:

Any debts accrued outside of these periods will not be protected, and as of Saturday 26 March 2022 the period before a landlord can take action against a commercial tenant to recover these debts drops to the pre-pandemic level of just 7 days’ rent arrears.

From 1 April 2022 landlords can also serve statutory demands or “winding-up petitions” against tenants who owe undisputed debts of more than £750. Pre‑pandemic this was an effective way to get tenants to pay their arrears and it’s likely that it will become so again.

So… Have commercial landlords finally realised that there isn’t a queue of cash-rich new businesses waiting to take over their empty high-street units, and are they starting to understand that there’s benefit in a more human approach to transactions? We’d love to hear your thoughts and your own experiences of dealing with landlords during the Covid-19 pandemic.

 

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