Dealing with commercial rent arrears as Covid-19 arbitration scheme closes

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The ability to refer to arbitration is no longer available to commercial landlords trying to recover rent arrears accrued during the coronavirus pandemic.

Associate solicitor Eleanor Longworth from Woodcocks Haworth and Nuttall Solicitors’ commercial property team, explains what the change means for commercial landlords and tenants, and how landlords should best deal with the recovery of such protected debt.

The moratorium period

The Commercial Rent (Coronavirus) Act 2022 came into force on March 25, 2022, bringing into law an arbitration process to protect businesses forced to close during the pandemic and unable to meet rental payments during that time.

Landlords were prevented from taking steps to recover unpaid rent that had accrued during periods of mandated closures, unless the landlord and tenant had already reached an agreement.

The act introduced a moratorium period, during which enforcement remedies would be suspended for the protected debt and a landlord or tenant could refer the debt to an arbitrator to determine what should be paid.

Arbitration

Under the act a case could be referred to arbitration within six months, meaning that the referral deadline for new arbitration cases was September 23, 2022. It has expired and to date the Secretary of State has not extended the referral window.

For those cases that have already been referred to arbitration, the moratorium will remain in force. The parties should await the arbitrator’s award, which will be binding. An award can only be challenged on limited grounds.

Recovering debt

Landlords now have the full suite of debt recovery remedies available to them for commercial property rent arrears.

For cases that have not already been to arbitration, landlords are now able to consider the following remedies for all debt, including any previously protected rent debt:

Issuing court proceedings to recover the debt Enforce monetary judgments obtained prior to the act coming into force Draw down on a rent deposit and then request a top-up by tenant, under a Rent Deposit Deed Petition for the winding up of a tenant company Serve a statutory demand or present a bankruptcy petition against a tenant that is an individual Exercise commercial rent arrears recovery Forfeit the lease and re-take possession of the premises

The benefits of any of these remedies will depend on the individual circumstances of each case. WHN Solicitors has a team of expert commercial property advisors who can advise in relation to each and put a strategy in place to help you – whether landlord or tenant – achieve your objective.

For more information contact Eleanor Longworth on 0161 761 4611 or by email via [email protected]