End to recovery moratorium on commercial rent arrears

Written by Scott Harrison

As a commercial landlord you will no doubt be aware that because of coronavirus restrictions in the last two years you have been prevented from recovering commercial rent arrears or taking forfeiture proceedings (where applicable) against your commercial tenants.

That moratorium imposed by the UK Government came to an end on 25 March 2022 and in turn the Government announced the new Commercial Rent (Coronavirus) Act 2022 (‘the CRCA’), which came in to force with new approaches (and restrictions) on commercial landlords, including action to be taken to recover rent arrears.

The CRCA effectively ‘ring fences’ pandemic related arrears associated with the various lockdowns and the closing of businesses. Arrears includes rent, service charges, VAT and interest. The ring fenced period runs from 21 March 2020 to coincide with the first restrictions imposed by the Government, to the date when the last restrictions were removed for the specific sector in question. The general dates provided are 11:55pm on 18 July 2021 for tenancies in England and 6:00am on 7 August 2021 for tenancies in Wales. However, the date may be earlier for certain business sectors.

CRCA also refers to a ‘Code of Practice’ that should be utilised. The intention is for commercial landlords and their tenants to be able to come to an agreement as how to best proceed with resolving the commercial rent debts and pandemic associated debts. Should negotiations not progress then the CRCA prescribes a legally binding arbitration process in respect of commercial rent arrears accrued during the Covid-19 pandemic.

Arbitration proceedings can be brought by either the landlord or tenant. The arbitrator will be able to determine whether a tenant should get any relief from payment of the debt. The arbitrator will seek to strike a balance between the profitability and security of the tenant’s business against the landlord’s need for economic reimbursement and its own solvency.

Any new arrears that accrue, or have previously accrued following the end of the ring fenced period, will be capable of being enforced either utilising the pre-existing commercial debt recovery routes or forfeiture of the lease (where applicable).

If you need help recovering debt from late rent on commercial buildings, get in touch with our commercial property solicitors at Humphries Kirk. We have offices in Bournemouth, Crewkerne, Poole, Wareham, Cranborne Chase, Dorchester, Parkstone and Swanage.

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