The Commercial Rent (Coronavirus) Act 2022 received Royal Assent on 24 March this year. It created a legally binding arbitration scheme to deal with the commercial rent arrears that arose as a result of the government requirement for non-essential businesses to close at various times during the virus crisis. The first decisions under the arbitration scheme have now been published, so Property Week asked legal experts to discuss the take-up of the arbitration scheme so far and the progress made to date in settling the mountain of pandemic-related rent debt.
Litigation Partner, Kellie Jones comments:
"The government’s impact assessment estimated that 15,500 businesses would be eligible to use the arbitration process, and that around 7,500 would go to arbitration, using the 1,200 arbitrators available. Falcon Chambers Arbitration has now published two decisions under the act that are interesting to practitioners but neither decision deals with the circumstances in which the ring-fenced debt will be reduced or waived altogether. Both were applications made by tenants. In the first decision, Gary Cowen QC determined that as the head office of a retail business was not required to close during the pandemic, the rent was not a protected rent debt under the act. Each business tenancy for which relief from payment is sought has to be considered separately to see whether it comes within the act. The second decision considered the requirements for a formal proposal under the act and provided some guidance. If parties wish to use the arbitration scheme, a reference must be made by 23 September 2022 (unless the secretary of state extends the scheme), which means that notice of the intention must be given by 25 August. If no application is made by the deadline and no agreement is reached, the moratorium on the protected debt will be lifted and landlords will be free to issue proceedings against tenants in respect of the rent arrears."