Commercial Rent (Coronavirus Act) Bill

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From 25th March 2022, the Commercial Rent (Coronavirus) Act (CRCA) came into effect with the purpose of resolving disputes over the payment of Covid-19 rent arrears between commercial landlords and tenants.

The new law provides a legally binding arbitration process for commercial rent debts related to the Covid- 19 pandemic in England and Wales. It outlines that Landlords and tenants are supposed to engage in serious discussions regarding rent arrears, applying the Commercial Rent Code of Practice (The Code). The Government encourages this negotiation but if an agreement cannot be reached, the new system can be used by eligible business as a means of arbitration.

Since the assent of the CRCA, the General Moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) will cease from the 24th of March 2022.

Protected rent debts

Protected rent debts (PRD) are defined as rent, service charges, insurance rent, interest, and VAT owed to CRCA in the context of a pandemic. The CRCA covers any PRD accrued between 21st March 2020 and the date the relevant business’ coronavirus restrictions ceased. As a result, any rent arrears that occur after 18th July 2021 are outside the scope of the statute but may be enforced using conventional procedures by a landlord against a tenant.

CRCA means:

  1. Business tenants are given relief from paying PRD during a six-month moratorium, meaning a formal breathing space from legal action, and
  2. If the landlords and tenants have been unable to reach an agreement about what relief (if any) should be given to the tenant, a new arbitration procedure can be accessed by them.

Moratorium period

If the arbitration process is initiated by either the landlord or tenant, the new statutory moratorium period begins on 24th March 2022 and ends on 23rd September 2022. During the moratorium period, the following requirements are placed on landlords, they are:

  1. are not allowed to lose property for non-payment of PRD;
  2. unable take payments in a manner that favors PRD discharge;
  3. are not authorized to use CRCA for non-payment of a PRD;
  4. are not permitted to draw down on tenancy deposits;
  5. unable to file new money judgement claims for rent and enforce money judgments won in respect of PRD;
  6. unable to present winding-up petitions solely in respect of PRD; and
  7. are limited in their ability to submit new bankruptcy petitions and some bankruptcies may be retrospectively invalidated.

Arbitration

If the landlord and tenant cannot reach an agreement on how to pay PRD between themselves, they may use the new arbitration procedure to get a quick and final resolution. Either party can apply for the arbitration process to commence within the 6-month moratorium period. The Code’s arbitration procedure is detailed below the:

  1. other party must be notified and given 14 days to reply before the party planning to refer the dispute to arbitration;
  2. party that launched the process has 14 days to review a response if one is provided. Either party may proceed to pursue arbitration after the 14-day period has passed or if there is no response;
  3. initiating party’s formal proposal to resolve the dispute, as well as supporting evidence, must be included in the application for arbitration filed by either side;
  4. opposing party has 14 days to reply to the formal proposal if the arbitrator agrees with the case;
  5. arbitrator can now request that the landlord and tenant agree to a hearing or a paper ruling; and
  6. arbitrator has 14 days, or as soon as reasonably practicable, to reach their decision following the procedure of resolution. All arbitration awards must be made public.

If you have any questions in relation to this article, contact our Commercial team to 020 3051 5060, send an email to info@oraclesolicitors.co.uk.

Jason McKenzie

Jason McKenzie has joined us as a Director, specialising in a range of legal areas including employment, commercial and public sector work.

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