Business Secretary Kwasi Kwarteng has today (9 November 2021) provided further clarity on the Government’s position on what will happen with the estimated £7 billion unpaid rent once the forfeiture moratorium ends in March 2022.

Both an updated Code of Practice and draft legislation, Commercial Rent (Coronavirus) Bill, have been announced with the Code taking effect immediately and the details of the proposed Bill still to be published.

The Code of Practice is designed to support landlords and tenants in their efforts to come to a negotiated resolution of any remaining commercial rent debts. The Code provides that where tenants are unable to pay their outstanding rent in full, they should negotiate in good faith with landlords. Landlords, if they are able to afford it, should look to waive commercial rent arrears.

The Code is backed up by the existing Coronavirus Act 2020 which, from today, has been extended to protect commercial tenants from County Court Judgements (CCJs), High Court Judgements (HCJs) and bankruptcy petitions issued against them in relation to rent arrears accrued during the pandemic.

Whilst the updates to the Code reiterate the Government’s existing position, the detail of the Bill will provide the legislative framework to bring any disputes to a conclusion. The Bill will establish a legally binding arbitration process which applies to commercial rent debts related to the mandated closure of businesses such as pubs, gyms and restaurants during the pandemic. Any debts which do not relate to mandated closures will not be covered by the legislation and it is also unclear whether the likes of office tenants will be covered by the legislation.

Whilst the announcement today assists in providing a refreshed Code backed up by protections against debt enforcement, landlords and tenants alike still await to see the small print of the proposed legislation which will establish whether their debts are to be the subject of Government mandated arbitration.

For further information, please contact Paul Jagger.