The general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales comes to an end today, 25 March 2022, but what happens next?
The Commercial Rent (Coronavirus) Act 2022 (the Act) was enacted on 24 March 2022 and applies to businesses tenancies including pubs, gyms and restaurants which were forced to close, in full or in part, from March 2020 until the date restrictions ended.
Where landlords and tenants have been unable to reach an agreement on what relief, if any should be afforded to a business tenant, the Act enables tenants to be granted relief from payment of certain pandemic related debts via a new, legally binding, arbitration process. Currently, a landlord or tenant wishing to invoke arbitration will need to refer the matter to arbitration by 24 September 2022.
Whilst landlords and tenants remain encouraged to seek a resolution between themselves, if arbitration does ensue the arbitrator is obliged to choose an option that is most likely to not only preserve the tenant’s business but also the landlord’s solvency. These options could include the debt being written off, either in full or in part.
In addition, and of immediate effect, a new moratorium period has been introduced during which wide ranging restrictions are imposed on landlords’ enforcement options in respect of “protected rent debts”. Protected rent debts are defined in the Act but any unpaid rent, service charge or interest after 18 July 2021 in England and 7 August 2021 in Wales will not fall within the definition of protected rent debt and landlords are entitled to pursue all “pre-pandemic” options to pursue such sums.
Restrictions in respect of protected rent debts include prohibitions on:
- Forfeiture of business tenancies for non-payment of a protected rent debt.
- Exercising CRAR in respect of a protected rent debt.
- Drawing sums from tenancy deposits to satisfy unpaid protected rent debts.
- Issuing proceedings for money judgment concerning protected rent debts (and any existing debt claims may be unilaterally stayed) and enforcing judgment already obtained in respect protected rent debts.
- The presentation of winding up petitions in respect of protected rent debts during the moratorium period.
- The presentation of new bankruptcy petitions.
Will this be welcome news for landlord and/or tenants? With the aim being the preservation of viable businesses, landlords will be pleased by the recognition that the viability of the tenant should not be at the expense of the solvency of the landlord. Landlords will also welcome the reinstatement of their enforcement rights for debts that are not protected rent debts.