Commercial Landlord And Tenant Issues In England, Wales To Watch Out For In Early 2022

• Published date: 02 March 2022
• Subject Matter: Real Estate and Construction, Landlord & Tenant - Leases
• Law Firm: Armstrong Teasdale
• Author: Mr Scott Hilton, Janice Martin and David J. Wise

Key legislative and case law developments in the context of commercial rent arrears accrued during the COVID-19 pandemic are expected in England and Wales in the first quarter of 2022. The Commercial Rent (Coronavirus) Bill 2021-22, currently making its way through Parliament, will introduce a binding arbitration process to be used when commercial landlords and tenants are unable to agree how to deal with outstanding rent arrears built up during the pandemic. Two notable cases are also heading for the Court of Appeal in relation to tenants' arguments for the nonpayment of rent during periods of pandemic-related enforced closure: London Trocadero (2015) LLP v Picturehouse Cinemas Limited and Bank of New York Mellon (International) Ltd and v Cine-UK Ltd and others.

The Commercial Rent (Coronavirus) Bill 2021-22 (the Bill)

The Bill, if passed as expected, is intended to operate as an arbitration scheme of last resort. This means that tenants will, in the first instance, be expected to negotiate with the landlord to agree how to deal with the pandemic-related rent arrears. It is expected landlords will seek to achieve a compromise with tenants where possible.

The existing regime under the Coronavirus Act 2020 (CVA 2020) includes measures restricting landlords' remedies in respect of rent debts built up during the COVID-19 pandemic, including a moratorium on forfeiture and restrictions on the use of the Commercial Rent Arrears Recovery regime. The Bill is intended to come into force by late March 2022, with the expectation that this coincides with the phasing out of the existing restrictions under the CVA 2020.

The Bill will be supplemented by a nonbinding Code of Practice for commercial property relationships during the COVID-19 pandemic (the New Code). The New Code replaces the existing code published on 19 June 2020. The New Code includes guidance and principles on the approach to all negotiations regarding rent arrears accrued during the pandemic and the operation of the statutory arbitration process.

Landlords and tenants should note that as currently drafted, the Bill provides that any unresolved disputes relating to rent debts caught by the new legislation must be referred to arbitration within the period of six months beginning with the day on which the Bill is passed into law. Notably, the Bill includes provisions that restrict landlords' remedies in relation to qualifying arrears until the six-month moratorium window for making a referral to...