On the 25 March 2022, the Commercial Rent (Coronavirus) Act (“CRCA”) came into force with the aim of resolving disputes between commercial landlords and tenants relating to the payment of Covid-19 rent arrears. The CRCA is supplemented by the New Code which came into effected in November 2021. The CRCA and the Commercial Rent Code of Practice (“The Code”) seek to compel landlords and tenants to enter into meaningful negotiations regarding rent arrears.

Within CRCA pandemic related rent arrears are defined as “protected rent debts” (“PRD”) which include rent, service charges, insurance rent, interest, and VAT. Any PRD accrued between 21 March 2020 and the date the specific coronavirus restrictions affecting the relevant business ended will be covered by CRCA. As such any rent arrears accrued after the 18 July 2021 will fall outside the definition of PRD and a landlord can pursue a tenant for the unpaid sums via the usual remedies.

CRCA creates:

(i) a six-month moratorium whereby business tenants are granted relief from payment of PRD; and

(ii) a new arbitration process that can be accessed by the landlords and tenants if they have been unable to agree between themselves what relief (if any) should be afforded to the tenant.

Moratorium period

The new statutory moratorium period runs inclusively from 24 March 2022 to 23 September 2022, or until the conclusion of any arbitration if the process is invoked by either the landlord or tenant. During the moratorium period certain restrictions are placed on the landlord which are summarised below:

(i) Landlords may not forfeit for non-payment of PRD during the moratorium period;

(ii) Landlords may not access CRCA for non-payment of a PRD during the moratorium period;

(iii) Landlords may not draw down against tenancy deposits to settle PRD during the moratorium period;

(iv) Landlords may not appropriate payments in a way that prioritises discharge of PRD during the moratorium period;

(v) Landlords may not issue new claims for money judgements for PRD during the moratorium period;

(vi) Landlords may not enforce money judgements already obtained in respect of PRD during the moratorium period;

(vii) Landlords may not present winding-up petitions solely in respect of PRD during the moratorium period; and

(viii) Restrictions on landlords presenting new bankruptcy petitions and retrospective invalidation of certain bankruptcy petitions and orders.

Arbitration

If the landlord and tenant are unable to reach an agreement concerning the payment of PRD between themselves then the new arbitration scheme can be accessed to reach a swift and binding resolution. The arbitration process is outlined in Annex C of The Code and is summarised below:

(i) The party intending to refer the matter to arbitration must notify the other party and provide them with 14 days to respond;

(ii) If a response is received the party who initiated the process has 14 days to consider the response. After the expiry of those 14 days, or 28 days if no response is received, either party can proceed to apply for arbitration;

(iii) Either party can apply for arbitration and the application must include a formal proposal from the initiating party to resolve the dispute, alongside supporting evidence;

(iv) If the arbitrator accepts the case, the other party will have 14 days to respond to the formal proposal;

(v) At this point the arbitrator will ask the landlord and tenant to agree to either a hearing or an on-paper decision;

(vi) Following the method of resolution the arbitrator has 14 days, or as soon as reasonably practicable to come to their decision. All arbitrators’ awards must be published.

Please do not hesitate to contact us should you have any questions in relation to this article.​​​​​​