The Commercial Rent (Coronavirus) Act 2022 came into effect on 24 March 2022 – but questions are being raised as to whether it came too late and if the Act holds any practical value.
What does the Act say?
The Act enables either a landlord or tenant to appoint an arbitrator to decide the outcome of unpaid commercial rent that accrued during the pandemic when restrictions were in place that put business operations on hold.
Has the Act Passed Too late?
The most severe restrictions for businesses were enforced in 2020. In a large majority of cases, the commercial rent disputes were settled with agreements in place. Such an Act being ratified two years later seems like a case of a little too late.
Furthermore, the UK Government released a code of practice for commercial property relationships following the Covid-19 pandemic – this was back in November 2021 – which would have helped landlord-tenant negotiations.
Is the Act flawed?
Tenants/landlords who decide they want to appoint an arbitrator do have to take on a bit of a risk. This is because the arbitrator has to determine whether the tenant company qualifies for a rent waiver or a payment plan. If an arbitrator deems the tenant not viable for an award or if an outcome affects a landlord’s insolvency, it could mean both parties entering the realms of wrongful trading.
The Government has provided arbitrators draft guidance in this respect.
The Act is Likely to Not Be Used By Many
Aside from the reasons mentioned already, the cost of going down this route is likely to be a turn-off for many. Furthermore, the Act may hamper a company who wants to pursue a rescue plan such as a company voluntary arrangement (CVA).
Overall, the Act may help in those cases yet to be resolved. On the whole, the Act is limiting and has comes too late in the day.
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