Commercial Rent (Coronavirus) Act: was demand for arbitration misjudged?

The Commercial Rent (Coronavirus) Act 2022 introduced a compulsory arbitration procedure for rent arrears and other debts accrued during the COVID-19 pandemic.

Since our webinar of 17 March 2022, Lodders’ Property Dispute Resolution team has been eagerly awaiting further commentary on the newly enacted Commercial Rent (Coronavirus) Act (the Act), with a particular interest in the mandatory arbitration procedure introduced by the Act.

The Act, brought into law on 24 March 2022, introduced a compulsory arbitration procedure that provides a structured forum for commercial landlords and tenants to deal with ringfenced rent arrears and other debts accrued during the pandemic.

Katie Mann, solicitor in Lodders’ Property Dispute Resolution team, considers the arbitration procedure, and if it has had the desired effect.

“Currently, (and this remains subject to change) the new arbitration procedure is available to landlords and tenants until 23 September 2022 – six months from the date the Act came into law.

“However, with just over two weeks to go before this expiry date, and with most parties having missed their opportunities to now submit their references (as the pre-arbitration steps can take up to 28 days), only five arbitration awards have been published, which is far fewer than expected.

“Despite the arbitration scheme being introduced to resolve disputes over pandemic-related arrears, it does not seem that commercial landlords and tenants have taken much notice of the new system.

“It has been made very clear to landlords and tenants that the new procedure would only be available for six months (initially), so we anticipated that tenants, in particular, would be ready and raring to go to submit their references to arbitrators in good time and try to mitigate the rent arrears they would be liable to pay back. However, it appears the expected uptake of the scheme has been hugely overestimated.

“It appears that landlords are waiting for the six-month period to expire, with a view to returning to more conventional methods of rent recovery, including the use of CRAR, forfeiture, and suing for arrears.

“With no murmurings of an extension to the 23 September deadline, landlords may be hopeful that pre-pandemic remedies will be reinstated. They should be cautious of a last-minute extension as was the case with the moratoriums under the Coronavirus Act 2020 which were initially in place for 3 months but were actually ultimately in force for over 2 years.”

Expert legal advice

Lodders’ Property Dispute Resolution team has extensive experience in advising landlords and tenants on rent arrears issues and the implications of the Commercial Rent (Coronavirus) Act.

If you would like to discuss a matter or require advice, please contact Katie Mann or another member of Lodders’ Property Dispute Resolution team.