- Rent Arbitration Scheme – Commercial Rent (Coronavirus) Act 2022
Rent Arbitration Scheme – Commercial Rent (Coronavirus) Act 2022
Rent Arbitration Scheme – Commercial Rent (Coronavirus) Act 202225th April 2022 - Published by Kuits Commercial Property team
The Commercial Rent (Coronavirus) Act 2022 has introduced a legally binding arbitration process to settle disagreements about Covid pandemic related rent arrears.
The new process relates to rent arrears which have accrued during the “protected period”, and further information about the “protected period” may be found here.
Landlords and tenants are encouraged to work together to come to an agreement about payment of such arrears, but in the event that an agreement cannot be reached between the parties direct as a last resort, the parties are now able to have recourse to the arbitration scheme. This scheme will determine what amount of such arrears the tenant is obliged to pay in a quick and cost-effective way.
Further Government guidance is awaited, but we have set out the arbitration process below:
1. Letter of Notification:
- The party applying for arbitration must send a letter of notification to the other party with a proposed figure for settling the unpaid protected rent debt;
- The other party must respond within 14 days to accept or counter-propose;
- The applicant has another 14 days to respond;
- After this period of 14 days (or 28 days if no interim response is received) has lapsed, either party can apply for arbitration
- Either party may apply for arbitration within six months of the Act coming into force;
- The application should include a formal proposal for settlement with supporting evidence;
- A fee is payable, but the amount is yet to be confirmed;
- The other party has 14 days to submit their own proposal with supporting evidence.
- The parties can opt for a public or a paper hearing;
- The parties will be notified of the award within 14 days of the hearing.
4. Arbitrator’s Powers:
- Writing off arrears, in whole or in part;
- Permitting a period of up to 24 months from the date of the award for the tenant to pay, including payment by instalments;
- Reducing or writing off the amount of any interest that the tenant would otherwise have to pay on the arrears under the lease.
How does the arbitrator decide?
Two key principles will apply in the arbitrator’s decision making process:
1) Tenant’s viability and affordability; and
2) Landlord’s solvency.
In making its judgment, the arbitrator will consider evidence provided by both parties with their proposals and may request additional information to assist in them in making their determination. For example, bank accounts. Parties should provide as much information as possible in support of their proposal. It should be noted that it is the tenant’s responsibility to evidence the viability of its business for the purpose of obtaining a favourable outcome.
All landlord’s remedies to recover such arrears are restricted whilst the arbitration process is ongoing.
Get in touch with a landlord and tenant advisor today
If you need advice with dealing with any such rent arrears, whether landlord or tenant, including documenting any agreements which are reached before referral to arbitration or discussing strategy under the new scheme, we can help. Please contact Commercial Property Senior Associate Emma Nimmo at firstname.lastname@example.org or Associate Kate Kurtz on email@example.com.