The Commercial Rent (Coronavirus) Bill (the "Bill") is due to receive Royal Assent on 25 March 2022. When it does, a mandatory arbitration scheme, to deal with rent arrears that have been accrued by businesses that were forced to close by the Government during the pandemic, will become enshrined in law.
The Bill is currently making its way through Parliament and has just passed through the Committee Stage in the House of Lords. A number of amendments to the Bill have been proposed. Some of the key ones are as follows:
- A requirement that only bodies that have adequate numbers of arbitrators be approved by the Secretary of State to conduct arbitrations under the Bill;
- Any relief awarded to a tenant by an arbitrator will, in effect, alter the terms of the tenancy in relation to the part of the rent debt that it concerns - i.e. so that any guarantor, or other third party who might be liable for the rent, will also benefit from the relief awarded;
- The Secretary of State must provide guidance on how the viability of a tenant's business should be determined and over what timescale;
- The impact of the arbitration scheme must be assessed 4 months after the day on which it comes into effect, including whether awards made pursuant to arbitrations under the Bill are "fair and consistent";
- Extension of the various moratoriums on enforcement of Covid-19 rent debts to cover any other entity who might be liable for the rent; and
- Recoverable interest on Covid-19 rent debts is to be subject to a statutory limit set by the Secretary of State.
The initial drafting of the Bill has been subject to intense scrutiny and property industry bodies such as that Property Litigation Association and Property Bar Association have identified a raft of potential omissions and/or areas for improvement. The amendments proposed in Parliament, assuming that they all make their way into the final version of the Bill, would go some way to addressing concerns in relation to the drafting. However, key questions remain unanswered. Such as:
- Are there enough arbitrators out there to meet the inevitably high demand for arbitrations over the limited 5 month window in which the arbitration scheme will be available?
- How will arbitrators be able to adequately assess the viability of a tenant's business in what will essentially be a "quick and dirty" arbitration process?
The proposed amendment requiring the "fairness" and "consistency" of the arbitration scheme to be reviewed 4 months after the scheme has been introduced suggests that there are members of Parliament who have doubts as to the scheme's overall workability and propensity to create equitable outcomes. Any parties who might be on the receiving end of inadequate arbitral decisions would no doubt prefer that the scheme is further refined before its introduction.
As things stand, the Covid-19 rent arrears arbitration scheme will come into effect on 25 March 2022.