Commercial landlords retain legal remedies against non-paying tenants

Summary

• The general moratorium on commercial evictions ended 24 March 2022, meaning commercial landlords can now take enforcement action on unprotected rent debts.
  
   
• The new law comes into force in England and Wales to provide a legally binding arbitration process to resolve certain outstanding commercial rent debts related to the Covid-19 pandemic.
  
   
• Commercial landlords and tenants are encouraged to negotiate agreements using the Code of Practice. If landlords and tenants cannot agree, the new binding arbitration system can be a last resort for eligible businesses.
  
   
• It is unclear how long the arbitration process will take at this stage. The window for referral to the scheme is initially open for six months, with estimates of the process taking between three and twelve months to complete, not including time for appeals.

New legally binding arbitration process

During the Covid-19 pandemic, the government protected tenants with a series of restrictions on landlords, including preventing forfeiture of leases on the grounds of rent arrears and restricting the use of commercial rent arrears recovery (CRAR).

Thursday 24 March was the last day of the general moratorium on commercial evictions and restrictions on CRAR in England and Wales, but eligible firms remain protected for the next six months during which arbitration can be applied for or until the conclusion of an arbitration.

A legally binding arbitration process will be available for eligible commercial landlords and tenants who have not already reached an agreement on rent debts. 

The law applies to commercial rent debts of businesses including pubs, gyms and restaurants, which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be in scope.

The government encourages commercial landlords and tenants to negotiate their own agreements where possible. 

Last year, the government published an updated Code of Practice to provide commercial landlords and tenants with a process for settling outstanding debts. 

The Code sets out that tenants who can pay their rent debt in full should do so and that in the first instance, tenants unable to pay in full should negotiate with their landlord.

The government has said it will also issue further guidance to landlords, tenants and arbitrators on how the process will work for all parties.

Expert legal advice

Our solicitors work alongside commercial landlords and tenants, providing the clarity and insight required to navigate the most complex issues. We can advise on a range of commercial property-related matters, including rent arrears. 

SO Legal has solicitors in London, Brighton, Eastbourne, Hastings, and Uckfield, providing support in all areas of commercial property law, litigation and dispute resolution.