Avoid lengthy and expensive process if possible
Negotiating rent deals is still the better way to clear any outstanding coronavirus-related rent arrears and avoid a long and costly arbitration process, an organisation of estate agents has said.
Propertymark shared the advice as the Commercial Rent (Coronavirus) Act 2022 recently received Royal Assent. This means a legally binding arbitration process will be available in England and Wales for eligible commercial landlords and tenants who have not yet reached an agreement to resolve outstanding commercial rent debts related to the pandemic.
“The best course of action for commercial landlords and tenants is still to try to negotiate their own agreements to clear outstanding debts using the Code of Practice. This will avoid the uncertain decisions, and the cost and time consequences that will result from a referral to arbitration,” Timothy Douglas, Propertymark’s head of policy and campaigns, said.
The law applies to commercial rent debts of businesses such as pubs, gyms and restaurants that were mandated to close, in full or in part, from March 2020 until the restrictions ended for their sector, providing them with further protection now the moratorium on evictions has expired.
Read more: What does 2022 hold for the commercial mortgage industry?
For tenancies that fall within scope of the Act and have failed to reach agreement, either party can apply for arbitration unilaterally within six months of March 24, the date the legislation came into force.
Arbitrators may award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of two years.
“The legislation is clear that arbitration should be a last resort. The measure of its effectiveness for the cases that do have to go down that route will rely on consistent decisions and awards handed down by the arbitrators across the country,” Douglas said.
