How time flies. It feels like it was only yesterday that property practitioners in England and Wales were eagerly reviewing the first drafts of the UK Government's long-awaited proposal to deal with commercial rent arrears that fell due during the Coronavirus pandemic. However, already, the deadline for starting the newly-created arbitration process has now effectively passed.
As a reminder, the Act extended the moratorium on landlords of commercial premises taking conventional enforcement action to recover rent arrears that fell due during the "protected period". The "protected period" varied depending on the specific use of the property in question to broadly reflect the periods during which those businesses had restrictions on opening (covering the period 21 March 2020 to 18 July 2021). Instead, where a settlement could not be reached, either party could refer the matter to a newly created binding arbitration process. If no settlement had been reached nor referral to arbitration made by 23 September 2022, then the moratorium on enforcement action would end and the arbitration scheme would close to new referrals.
Although arbitrations can be referred until 23 September 2022, a party instigating a referral must first serve notice on the other and allow 28 days before making a referral. So, unless an initial notice has already been served, it is likely to be too late to now commence the process.
Status of Covid-related arrears post 23 September 2022
From 23 September 2022, any rent arrears that fell due during the protected period that have not yet been either referred to the arbitrator or settled by the parties can be pursued by landlords using pre-pandemic enforcement methods. These include the 'CRAR' regime, forfeiture of the lease by peaceable re-entry or court proceedings, debt recovery proceedings and insolvency processes such as winding up proceedings.
We are not yet aware of any rumours of this deadline being extended. However, given the Government's past form of late extensions to COVID moratorium periods, it is not impossible that it will be.
If you are a commercial landlord or tenant with concerns or queries about commercial rent arrears or, how the closure of the arbitration scheme may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies contact.