Menu
Moratorium on Commercial Rent Arrears to End

Moratorium on Commercial Rent Arrears to End

By In Blog, Commercial Conveyancing On 04/03/2022


The moratorium on commercial rent arrears ends on 25 March 2022. As per a new Code of Practice, landlords and tenants must follow an arbitration process where rent arrears have developed as a direct result of the pandemic.

Commercial rent arrears during the pandemic

Early on in the pandemic, the government imposed a moratorium on a commercial landlord’s ability to evict a tenant for the non-payment of rent. This moratorium was extended in the summer of 2021, but will officially come to an end on 25 March 2022.

So, what happens then? Will landlords be able to forfeit a lease, where a commercial tenant has fallen into rent arrears? The answer is that it depends.

Debts related to mandated closures

Where a commercial rent debt relates to the mandated closure of a business during the pandemic, the landlord and tenant must follow a new Code of Practice. This states that where a tenant is unable to pay the rent in full, the tenant and landlord must first attempt direct negotiation.

The hope is that the parties will agree how to manage the debt. This may involve the landlord waiving some or all of the rent arrears where possible. Research by the British Property Federation shows that most landlords and tenants are able to reach an agreement between themselves. In fact, more than 80% have found a solution since the start of the pandemic.

Compulsory arbitration

If negotiations are unsuccessful, the landlord and tenant must then proceed to a compulsory arbitration process. Arbitration is a form of dispute resolution. An arbitrator is appointed who hears each side of the story. The arbitrator then decides the outcome of the complaint. The decision is legally-binding, meaning it must be followed by both the tenant and the landlord.

In this context, the arbitrator will be focused on keeping the tenant’s business alive, while at the same time ensuring the landlord’s solvency. The arbitrator can order the landlord to waive some or all of the debt, reduce the interest, or provide the tenant with a time period in which to settle the debt.

Debts not related to the pandemic

As per the government press release, published on 9 November 2021, the new Code of Practice only applies “to commercial rent debts related to the mandated closure of certain businesses such as pubs, gyms and restaurants during the pandemic. Debts accrued at other times will not be in scope.”

Therefore, compulsory arbitration is only required where the debt arose while the business was closed. Otherwise, a commercial landlord is allowed to pursue the other legal avenues available where rental debts have accrued. This includes court proceedings, forfeiture of the lease and Commercial Rent Arrears Recovery (CRAR).

Get legal advice

The end of the moratorium on commercial rents is fast approaching. Some will be subject to the new laws, while others will be open to legal proceedings. Whether you are a landlord or tenant dealing with a commercial debt, you need to be sure what your options are going forward. Our commercial property solicitors can advise you further.

To speak to a solicitor, call us on 0191 567 7244 and we’ll be happy to help you. If you would rather contact us online, email us at info@cooklaw.co.uk and one of our team will be in contact with you shortly.


Related Posts