New laws and code for UK commercial rent arrears – what can landlords do now?

On 9 November 2021 the UK government published the highly anticipated draft bill and updated Code of Practice to deal with outstanding commercial rent debts accrued as a result of COVID-19. 

What is the current position?

• Since March 2020, the government placed a number of restrictions on commercial landlords seeking to recover rent arrears from their tenants (including restrictions on forfeiting commercial leases). 
• Most of these restrictions are due to expire on 25 March 2022. 

What's new?

• From 9 November 2021 the updated Code of Practice underpins negotiations between landlords and tenants in settling outstanding debts and will apply to the new arbitration process introduced by the draft bill when it comes into force. 
• From 10 November 2021 the government is protecting commercial tenants from debt claims (including bankruptcy petitions and judgments in the High Court and Country Court) issued as a result of rent arrears accrued during COVID-19. 
• From 25 March 2022 new laws will provide a legally binding arbitration scheme to resolve certain outstanding commercial rent debts accrued as a result of mandated closure during the COVID-19 pandemic. 

Key takeaways 

• The final remedy available to landlords (issuing a debt claim) has been removed. This means that if landlords cannot negotiate an agreement, they must wait until after 25 March 2022 to arbitrate.
• Commercial rent arrears accrued during periods when a business was not forced to close are not captured within the scope of the draft bill.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.