With many sectors still recovering from the impact of the pandemic, it is positive to see that levels of unpaid rent have fallen this quarter and a sense of normality is returning.
With businesses starting to return to their workplaces, it is likely that landlords have begun to take a harder approach to non-payments. However, there are still likely to be arrears related to pandemic-related closures, which landlords will need to address.
The new binding arbitration process that is set to be introduced in March 2022 will require both landlords and tenants to meet a mutual agreement around how rent disputes will be resolved (and in default an agreement will be imposed). However, for tenants with rent due in September this will be too little too late, with the arbitration process not applying to new rents falling due. With the freeze on winding-up petitions also being lifted on 1 October, tenants may have felt they had little option but to pay up.
Although the Covid-19 Code of Practice was key in helping landlords and tenants meet mutual agreements, it is still very much a temporary solution. The introduction of the new arbitration legislation will play a crucial part in continuing to help tenants and landlords resolve outstanding rent arrears. However, some controversy does remain around how fair the new regime will be, so further clarification is needed sooner rather than later.
Tenants and landlords should use the next few months wisely, as it has been indicated that under the new arbitration regime, there could be a risk of financial penalties if both parties are unable to solve matters reasonably. To avoid any surprises, discussions should commence as early as possible.
James Fownes is property disputes partner at law firm Shakespeare Martineau