Moratorium end is too little, too late

While welcome, in truth this long-overdue move proves too little, too late for landlords who have long been condemned by the government as open piggybanks. After all, many landlords have already had to come to their own arrangements with tenants while they have been cast adrift without legal recourse.

The introduction of the Commercial Rent (Coronavirus) Act 2022, and with it a new binding arbitration process, is really little more than cold comfort for landlords. Tenants with protected rent arrears (those incurred between March 2020 and July 2021 in sectors that were subject to government restrictions) now have six months to keep their landlords at bay before action to recover protected rent debt can be taken or leases can be forfeited.

As with all arbitrations, the decision rests with one individual. Different arbitrators are bound to take different views on what is equitable in any particular case, so it will be interesting to see whether there is a true balance between the interests of landlords and tenants. There are always risks when commercially sensitive business decisions are delegated to third parties.

As a result, the best advice for both parties is to begin negotiations now and take control of your own destiny. Certainly, the threat of forfeiture, winding up or sending enforcement agents to recover goods under Commercial Rent Arrears Recovery can now be used as leverage in negotiations. Arbitration may be the way forward in cases where a tenant might end up in a CVA, for example, since an arbitration award will be outside the terms of a CVA, thus protecting the landlord’s debt. Every case needs to be looked at carefully.

Of course, the new legislation and the end to the moratorium are moves to be praised, but not unconditionally. The exit route still has its fair share of hurdles, and it may be a while before we can correctly measure the true extent of the unpaid rent crisis.

Katherine Campbell, head of real estate disputes, Reed Smith