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Whilst, in light of the roll out of vaccines, there is a glimmer of hope that better times are ahead, commercial rent arrears have been in a state of uncertainty ever since the outset of the pandemic with the introduction of the Coronavirus Act 2020 (CA 2020) and the moratorium of evictions for non payment of rent.

On 16 June 2021 the Government announced the intention to extend that moratorium, which was due to end this month, to 25 March 2022 in light of Government’s decisions to push back the lift on restrictions. Restrictions on landlords being able to recover rent arrears by taking control of tenant’s goods will also be extended to 25 March 2022 and there is to be an extension of the existing restrictions on statutory demands and winding up petitions (and certain other Covid related amendments to insolvency legislation by 3 months to 30 September 2021).

Although the moratorium, when it was initially introduced, was an important measure aimed at protecting good business from failing, the latest planned extension (the third so far) will not be welcomed by landlords who are owed considerable amassed debts.

The overriding message from Government has been that landlords and tenants should work in partnership to negotiate affordable rent agreements (as set out in its Code of Practice for commercial property relationships during the COVID-19 pandemic (the Code)).

So what next?

Making a statement on the economy in the Commons, Chief Secretary to the Treasury, Stephen Barclay, said that he believes that the extension policy “strikes the right balance between protecting landlords and supporting those businesses that are most in need”.

Mr Barclay went on to explain that Government plan to establish a backstop so that where commercial negotiations between tenants and landlords are not successful, tenants and landlords go to binding arbitration.

Business Secretary Kwasi Kwarteng said: “Sorting out commercial rent debts will be key to enabling businesses to plan ahead with certainty and ultimately build back better from the pandemic. The new arbitration process will be underpinned by law, providing commercial tenants and landlords with peace of mind that Covid-related rent debts will be settled fairly, and with finality. In the meantime, I encourage landlords and tenants to keep working together to reach mutually beneficial agreements.

Extending the ban on commercial evictions is a necessary measure to help businesses through the final stages of the pandemic, and comes on top of our generous £350bn package of support that has been available throughout the pandemic.”

Evidence suggests that to date, in many cases, the productive conversations envisaged under the Code are not taking place. Further, despite a plea to tenants who can pay rent to pay rent, some tenants are taking advantage of the moratorium to avoid paying rent. Whilst we await the details of the planned arbitration process, the message is that failure on the part of landlords and tenants to work together to reach an agreement on rent could result in the decision on rent payment being taken out of their hands.

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