INSIGHT - Edition Ten - Winter 2021 online - Flipbook - Page 20
NEW ARBITRATION SCHEME FOR
PANDEMIC RELATED DEBT
As the UK continues to emerge from the Coronavirus
pandemic and associated lockdowns, it has been reported
that 80% of landlords and tenants have reached agreement
on how to deal with arrears which have built up as a result
of the lockdowns. Another recent study by Remit Consulting
reported that owners of commercial properties in the UK
were owed around £6.97 billion as at the end of June 2021.
At youngsRPS we have engaged with all our commercial
tenants during the pandemic in order to support tenants
where it was possible to do so, and reach negotiated
agreements where necessary.
• It will relate to rent debt accrued while businesses were
legally forced to close due to the pandemic
• The ban on forfeiture based on rent arrears will continue
until March 2022
The Government hopes the Bill will become law in 2022. It will
apply only to commercial rent, service charges and insurance
payments, and for debt which accrued during periods when
the business concerned was forced to close due to the
pandemic. Businesses permitted to stay open throughout
the pandemic will not be covered by the arbitration process
if they chose to close for health or economic reasons.
The Government’s intention is that the new arbitration
scheme is only to be used as a last resort, where landlords and
tenants have been unable to resolve their dispute, and where
the Code of Practice has also failed to provide the basis of an
agreement. The underlying principle of the scheme is that an
arbitration award should be aimed at preserving the viability
of the tenant’s business, as long as it is also consistent with
preserving the solvency of the landlord. The parties will be
free to continue negotiating after the arbitration process has
been commenced. It is intended that there will be a window
of 6 months from when the new legislation comes into
force (probably March 2022), during which time, parties can
apply for arbitration. Either party can apply to the arbitrator,
who will impose a legally binding agreement. It is intended
that the maximum timeframe to repay the debt will be 24
months.
On 9 November 2021, the Government published a
revised Code of Practice on these issues. As with previous
Government advice, it encourages tenants who can pay rent
to pay it in full, but where this is not possible, it encourages
both landlord and tenant to negotiate the arrears to be
waived or postponed. The code applies to all rent arrears that
have built up as a result of the impact of the pandemic, even
for businesses that were not forced to close their premises.
The Government has also, at the same time, introduced the
Covid-19 Arbitration Bill, which will introduce new laws to
deal with any remaining disputes over commercial rent debt.
The key features of the new law will be as follows:
• Introduce a new legally binding arbitration process from
March 2022
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In the meantime, forfeiture of any commercial lease due to
rent arrears will continue to be banned until 25 March 2022,
and this ban is not limited to premises which were legally
forced to close. It is planned that the new Bill will receive
Royal Assent in spring 2022.
Across our commercial management portfolios, we have
reached negotiated settlements with the vast majority of
tenants. However, with a reported £6.97 billion of commercial
property rent arrears still unpaid across the UK, there is still
a substantial amount of work to be done, particularly where
the landlord’s property is mortgaged, and the landlord is not
able to write off debt. There is still a danger that some tenant
companies will fail and insolvencies increase. Negotiation
between the parties is, of course, key to amicable solutions.
If you would like to discuss arbritation matters with our
in-house commerical team, please email paul.fairlamb@
youngsrps.com or call 0191 261 0300.