COVID-19 commercial rent arrears – UK government publishes policy statement but questions remain

Quick read

In response to the call for evidence launched earlier this year, the UK government recently published a policy statement outlining its plans to support tenants with pandemic related rent arrears.

Key takeaways

The government will pass legislation in this parliamentary session to "ringfence" arrears relating to periods of enforced closure from March 2020 until restrictions for the tenant's sector were lifted.
Landlords and tenants are encouraged to negotiate waivers or deferrals of ringfenced rent arrears. If agreement is not possible, new legislation will introduce a binding arbitration process to resolve outstanding disputes. This scheme is to be used as a last resort and will be carried out by impartial arbitrators.
A "strengthened" code of practice will be published before the new legislation takes effect. This will contain principles to which both parties and the arbitrators must adhere during negotiations and the arbitration. These principles will then be enshrined in the new legislation.
Tenants who can pay should do so. Tenants will no longer enjoy protections for rent arrears falling due outside the ringfenced period and should pay these arrears in full.
The statement hinted at further measures on the ability of landlords to use insolvency measures to recover rent arrears. Find out more about the extensions to current temporary insolvency measures here.

Questions remain

The government's outline plans leave many questions unanswered, including:

How long will the new legislation apply for?
How will the arbitration scheme work?
How will the new legislation determine if a tenant has been "impacted" by closures?
What happens to proceedings which have already been issued?

We await the publication of the new code of practice (expected this autumn) to provide clarity and more detail on how the new measures will work in practice.