The pandemic has previously prevented commercial landlords from forfeiting a lease by peaceable re-entry due to rent arears as a result of the Coronavirus Act 2020 (“the Coronavirus Act”). However that situation has now changed due to the Commercial Rent (Coronavirus) Act 2022 (“the Act”).
The Government was aware that if the protections afforded by the Coronavirus Act were just allowed to end on 25 March 2022 then landlords would be able to evict tenants by peaceable re-entry for arrears that accrued during lockdown and when most businesses were shut. The Act was therefore brought into law to prevent landlords from being able to take enforcement action on those arrears.
The Act allows a landlord or tenant to refer rent arrears accrued during lockdown to a binding arbitration process whenever the parties are not able to come to an agreement themselves. The Act covers “protected rent debt” which is rent due under a tenancy which was adversely affected by the pandemic and the rent is attributable to a period of occupation by the tenant, or for a period within, the protected period applying to the tenancy.
Either landlord or tenant may refer the protected rent debt to arbitration within six months from the Act coming into force on 25 March 2002.
The Act provides for a temporary moratorium on enforcement of protected rent debts which prevents a landlord from bring a debt claim at court, using the commercial rent arrears recovery procedure, enforcing the right of forfeiture by peaceable re-entry or using a tenant’s deposit.
If a reference is made to the Arbitrator then he or she must assess the viability of the tenant’s business and if it is determined that the business is not viable even if the tenant is given relief from payment then the reference must be dismissed. In other words relief would not be granted to the tenant. If it is determined that the business is viable or would be viable if relief is granted then the Arbitrator should decide whether to grant relief and if so, to make an award setting out the relief to be granted.
It is worth noting however that all the usual enforcement methods, as mentioned above, are available to landlords in relation to arrears post lockdown i.e. that are not protected rent debt and not therefore covered by the Act.