Forfeiture moratorium

The Government has announced this week that the measures currently in place to protect commercial tenants from eviction as result of rent arrears run up during lockdown, will be extended to 25 March 2022.  

Commercial Rent Arrears Recovery (CRAR)

The restriction on the use of the CRAR (bailiff) process by landlords for rent arrears will also be extended to 25 March 2022.

Statutory demands and winding up petitions

The restrictions on statutory demands and winding up petitions shall also remain in place for a further three months (i.e. until 30 September 2021).  Under the current restriction creditors are unable to take enforcement action against debtors, if a debtor has been affected, financially, by Covid-19.

Mandatory arbitration process

The Government has also announced that new primary legislation will be introduced to "ringfence outstanding unpaid rent that has built up when a business has had to remain closed during the pandemic".  

Landlords will be expected to make allowances for the ringfenced rent arrears and share the financial impact of arrears with their tenants.  Measures that the Government expects to see include landlords waiving some of the total amount and/or agreeing a long-term repayment plan.   

Where agreement cannot be reached between landlords and tenants, a binding arbitration process will be put in place to resolve disputes.  The arbitration process will be delivered by "private arbitrators" that will "have to go through an approval process to prove their impartiality". 

Comment

It has been expected for some time that the Government would extend the restriction on evictions and other enforcement measures.  However, few anticipated that they would be extended for a further 9 months or that this would be accompanied by legislation which forced concessions onto landlords.  Whether this will encourage landlords and tenants to reach a compromise in relation to outstanding liabilities, or simply usher in a new wave of disputes, remains to be seen.

With regards to the arbitration process, this is a potentially radical proposal that will re-cast contractual relationships between landlords and their tenants.  Until now, tenants' contractual obligations to pay rent in full, during lockdown, had been confirmed by the Government, and this position had also been upheld by the Courts in a number of recent cases. 

At this stage, we have been given very little detail on the substance of the new proposals, how the arbitration process will work, or the criteria that the arbitrators will apply when deciding how much of their arrears tenants will be required to pay.  However, whatever the legislation eventually says, landlords and tenants will no doubt be waiting anxiously to see how the Government intends to implement this new approach.