Commercial Rent (Coronavirus) Act: who will prevail?

The effect of the act is to ring-fence ‘protected debts’ and prevent evictions in respect of those debts only. Forfeiture will once again be permitted for all other rent arrears that do not relate to the periods a business was forced to close.

Businesses that could legally open but chose not to do so or encouraged their staff to work from home in line with government guidance can no longer benefit from protection against commercial evictions.

For the debts that are caught (and this is likely to be confined to rent owed by hospitality and retail businesses subject to forced closure), the parties now have a six-month window to refer these debts to an arbitrator to decide how much the tenant should pay.

The arbitrator will decide first whether the tenant’s business is viable (as only viable businesses will be entitled to relief under the scheme) and secondly whether that tenant should be granted relief by reference to the tenant’s ability to pay and the landlord’s solvency.

The arbitration scheme is only available for landlords and tenants who have not already reached an agreement. However, there is a risk businesses that think they might do better out of the arbitration scheme than under their existing agreements may try to argue no agreement was concluded to make their arrears eligible for the scheme.

The lifting of the restrictions after two long years will be a relief for some landlords where tenants have leveraged the moratorium to withhold rent for reasons unconnected with lockdown closures. For tenants with unresolved rent debts for periods of closure, it is the beginning of a new phase for resolving those disputes. Now, it is in the hands of the arbitrators as to whether landlords or their tenants will prevail.

Stephanie Newton, senior associate, Stevens & Bolton