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Pandemic brings new laws and Code

We have looked in the past (see newsletter January, 2021) at some of the restrictions placed on landlords and mortgagees preventing, temporarily, the commencement of eviction proceedings. On 9 November, 2021 the Government issued a press release setting out new laws and a Code of Practice to resolve remaining Covid-19 commercial rent debts.

Commercial tenants are presently protected from eviction until 25 March, 2022 thus providing time to negotiate commercial rent debts caused by the pandemic. Those negotiations are now underpinned by the new Code of Practice which states tenants unable to pay their rental debts (including service charges and insurance payments) in full as a result of premises having been closed or having had business restricted during the pandemic from 21 March, 2020 (‘the ring-fenced period’) should negotiate with their landlord in the expectation that the landlord will waive some or all of the arrears where they are able to do so. To aid in establishing the ring-fenced period, Annex A of the Code sets out timelines for differing sectors although parties may find their own circumstances differ. Annex B to the Code lists some factors to be taken into account by the parties e.g. business performance since March 2020, payments to directors and shareholders, other debts, government grants etc.

Additionally, from 25 March 2022 new laws are to be introduced (a Bill is presently in its committee stage in the House of Commons) which will establish a legally-binding arbitration process for some, but not all, commercial landlords and tenants who have not already reached an agreement pursuant to the Code. The Bill covers such businesses forced to close for ring-fenced periods such as pubs, gyms and restaurants in England and Wales. It contains a landlord’s moratorium on some other remedies (e.g. CRAR) and insolvency arrangements whilst the arbitration is in progress.

Parties using the Code and, when introduced, the arbitration service should exhibit transparency and collaboration, a unified approach to third parties and to act reasonably and responsibly in order to reach a swift agreement. The aim is to preserve viable businesses but not at the expense of the solvency of the landlord. The Code is strongly backed by the Scottish Government. We can only wait to see how successful negotiations and arbitrations will be throughout the UK.

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