New UK rules governing unpaid commercial rent

17 Nov 2021

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It has been widely documented that commercial landlords in the UK have unpaid rent of £7 billion, accumulated during the Covid-19 pandemic. The UK government stepped in during this time to ensure a moratorium was in place for tenants that missed rental payments to not be evicted.

On 9 November 2021, the government announced new laws and a Code of Practice to resolve remaining Covid-19 commercial rent debts, intended to be enacted in March 2022, coinciding with the end of the current moratorium.

The bill provides a new moratorium preventing landlords making a debt claim in respect of ringfenced debts until the bill is enacted and also until either a period of six months from when the bill comes into force, or where a referral to an arbitrator has been made.

This is a notable development in the draft legislation and impacts on the ability to make such debt claims (eg County Court judgments, High Court judgments and bankruptcy petitions) and placing the importance on the new arbitration scheme.

Landlords and tenants have both had their own struggles with paying or recovering rent during the pandemic. The announcement on 9 November may leave some landlords disappointed and also delay what some may see as an inevitable build-up of legal claims until post-March 2022.

Although the draft legislation is not expected to become law until March 2022, the message behind both is that landlords and tenants should discuss and negotiate a solution in respect of accrued Covid-19 rent arrears in accordance with the suggested Code of Practice before the bill becomes law. Landlords will especially need to consider the impact of the draft legislation as it will have an impact on any rent recovery plans given the potential for there to be arbitration costs on top of court fees, delays in recovery and a reduced payment if an arbitrator is used and reduces the assessed debt.

If you have any queries relating to any of the issues raised here, please contact Roger Weston.