What are the main features of the Commercial Rent (Coronavirus) Act 2022 and does it apply to me?
The Commercial Rent (Coronavirus) Act 2022 (the 'Act') came into force on 24 March 2022 in order to assist in resolving commercial rent arrears that accrued during the COVID-19 pandemic. Its main focus is attempting to strike a balance between preserving viable businesses and the solvency of landlords.
What is the aim of the Act?
The Act aims to assist landlords and commercial tenants in resolving disputes in relation to commercial rent arrears that accrued when businesses were mandated to close during the pandemic by introducing a legally-binding arbitration process.
Which tenancies are covered by the Act?
Any business tenancies to which Part 2 of the Landlord and Tenant Act 1954 (the 'LTA') apply, are covered by the Act. These include leases, underleases, periodic tenancies.
Licences and tenancies that are specifically excluded from the LTA would therefore not appear to be business tenancies for the purpose of the Act.
Which rents are covered by the Act?
Section 2(1) of the Act defines rent as:-
“(a) an amount payable by the tenant to the landlord under the tenancy for possession and use of the premises comprised in the tenancy…
(b) an amount payable by the tenant to the landlord under the tenancy as a service charge
(c) interest on an unpaid amount within paragraph (a) or (b).”
A protected rent debt, under the Act, is any rent owed under a tenancy that was adversely affected by the pandemic and the rent became due between 2.00pm on 21 March 2020 and 11.55pm on 18 July 2021 (in England) or 6.00am on 7 August 2021 (in Wales) (the 'Relevant Period').
A tenant is said to be adversely affected if, during the Relevant Period, their business (or part of it) was mandated to close. As mandatory closure orders were lifted at various stages of the pandemic, the Relevant Period will differ dependent on the type of business carried out.
What happens if the parties cannot resolve their dispute in relation to protected rent debts?
The Act has introduced a moratorium which began on 24 March 2022 and is in place until 23 September 2022, whereby if a landlord and tenant cannot reach an agreement in relation to the protected rent debt, either party may refer the matter to arbitration during the moratorium period. During this moratorium, the landlord is unable to take certain enforcement action (such as issuing a winding up petition) against the tenant in relation to the protected rent debt.
Can a landlord take action for rent that is not a protected rent debt?
In short, yes they can. The Act does not apply to unprotected rent debt and therefore a landlord can take enforcement action in relation to it.
What award can an arbitrator make in relation to protected rent debt?
This will be wholly dependent on the circumstances and the proposals put forward by the parties, but an arbitrator’s powers include writing off the whole or part of the debt, allowing an instalment plan and limiting interest.
Articles are intended as an introduction to the topic and do not constitute legal advice.