There is anecdotal evidence that commercial rent arrears have been on the rise during the pandemic as businesses were forced to close.
On 4 August 2021 the Government published some of the proposed objectives regarding a planned binding arbitration system for commercial landlords and tenants who have been affected.
It is planned that the new arbitration system will only apply to commercial tenants who have been affected by COVID-19 business closures and only for the period during which the restrictions applied, from March 2020 (the “ringfenced period”).
At this stage the new arbitration process is intended to be an effective way of resolving disputes and planned to be quicker than comparable court proceedings.
The parties will be encouraged to reach consensual agreements where possible. It will be expected that terms should be agreed between impacted landlords and tenants.
The final details are yet to be announced; however the intention is that the process will enable landlords to evict any tenant for the non-payment of rent incurred prior to March 2020 and from the end of the ringfenced period.
Landlords will also be able to charge interest on rent incurred from the end of the ringfenced period onwards, subject to the terms of the lease.
It is planned that there will be an expectation that tenants and landlords will both contribute to the cost of the arbitration. However, there are likely to be costs penalties for those parties who have not acted in good faith.
The binding arbitration system is designed to trigger the start of a return to ‘business as usual’, by balancing the protection of landlords and supporting those businesses most in need.
Even prior to the scheme coming into force there are other options available in situations where disputes arise regarding commercial arrears. Colman Coyle’s Property Litigation department regularly acts for Landlords and Tenants who require advice and assistance in these matters. If you would like to discuss a potential case, please contact our team on +44 (0)20 7354 3000 or email@example.com.