Changes to Rules Regarding the Recovery of Unpaid Commercial Rent

24 March 2022 saw the granting of Royal Assent to the Commercial Rent (Coronavirus) Act 2022 (“the Act”). The Act introduces significant changes to the process by which commercial landlords can recover unpaid commercial rent from tenants.

Rent which fell due during the “protected period” is now ringfenced as a “protected rent debt” under the new legislation. The protected period is 21 March 2020 to 18 July 2021 for restaurants and leisure premises and 21 March 2020 to 12 April 2021 for non-essential retail premises.

Landlords cannot forfeit leases or take any other kind of recovery action (such as issuing a money claim against a tenant) in respect of protected rent debts. Instead, these protected rent debts will be subject to a binding arbitration process in which an arbitrator will make a determination as to how much, if any, of the unpaid rent a tenant should be liable to pay. The arbitration process will take into account all of the relevant circumstances, including the effect which the Coronavirus restrictions had on the tenant’s business.

Prior to entering into the arbitration process, landlords and tenants are encouraged to work together to negotiate a settlement of any outstanding protected rent debts, in line with the Government’s new Code of Practice, details of which can be found here:

The news for commercial landlords is not all bad, however. Coinciding with the passing of the Act is the lapsing of the moratorium on forfeiture of commercial leases for unpaid rent which has been in place since March 2020. From one minute past midnight on 26 March 2022, landlords will be able to forfeit commercial leases (either through court proceedings or peaceable re-entry) for unpaid rent and other sums due under a lease which are not protected rent debts as defined in the Act.

As ever, compliance with the terms of the relevant lease as regards forfeiture and the ability to forfeit in respect of non-rent debts, is necessary.

In addition, commercial landlords are also able to use the Commercial Rent Arrears Recovery process from the same time: one minute past midnight on 26 March 2022.

If you require any assistance in either recovering debts which are not subject to the new arbitration process or require further advice on the arbitration process and what this entails, please do not hesitate to contact our Property Litigation Department.

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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.