The Code of Practice states that in first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord waives some or all rent arrears where able to.
The Commercial Rent (Coronavirus) Bill, will establish an arbitration process for commercial landlords and tenants who have not reached an agreement by this 25 March, and will apply to businesses including pubs and restaurants.
Business Secretary Kwasi Kwarteng said: “Today’s measures provide commercial landlords and tenants with the clarity and certainty they need to plan ahead and recover from the pandemic.
“We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”
These measures support Government’s decision last year to protect commercial tenants from eviction until 2022, creating time for landlords and tenants to negotiate how to split commercial rent debt costs due to businesses closing in lockdown.
Easing the burden on businesses
From today (Tuesday 9 November), the Government is also protecting commercial tenants from debt claims, including County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions issued against them in relation to pandemic-accrued rent arrears.
UK Hospitality CEO Kate Nicholls said: “We welcome the publication of the updated Code of Practice. Vitally important is the emphasis on ongoing negotiation to share the burden of the impact of lockdowns and restrictions that prevented hospitality businesses from trading for so much of the last 18 months.
“It is in the long-term interests of landlords and tenants to come together and find solutions that ensure business survival and that do not undermine the economic recovery.
“We share government’s view that arbitration should be a last resort and this process must take into account the exceptional and existential level of pain that hospitality businesses have faced over the last 18 months.
“It must not impact this industry’s ability to rapidly recover and create jobs throughout the country.”
The laws will come into force in England and Wales, with Northern Ireland holding power in the Bill to introduce similar legislation. Debts accrued outside of the pandemic will not be in scope of the bill.
The devil is in the detail
Chief Executive of the British Retail Consortium Helen Dickinson OBE said: “The overwhelming majority of retailers with stores just want the breathing space to trade their way out of the debt unavoidably built up during the pandemic and a constructive agreement with their landlord.
“While we support the principle of compulsory arbitration, the devil will be in the detail on issues around what tenant viability really means in practice and the power of arbitrators.”
British Property Federation CEO Melanie Leech said: “Property owners and their tenants should be wholly focused on working together to continue the economic recovery from the Covid-19 pandemic.
“The majority have already reached agreement on the treatment of Covid-related rent arrears, with millions of pounds of support being provided by property owners to tenants in distress.
“The publication of an updated Code of Practice is a clear signal and framework for the minority who have not yet done so, to come together, reach agreement and look to the future.”