New Code of Practice for Commercial property relationships post pandemic

The Government has published its new, Code of Practice for Commercial Property Relationships following the COVID-19 pandemic, which replaces the previous Code of Practice published in June 2020.  

This accompanies the Commercial Rent (Coronavirus) Bill, which is currently making its way through Parliament. As it currently stands, the Bill will remove from landlords the last remaining options they have for enforcing payment of pandemic-related rent arrears and will effectively force landlords down a new arbitration route.  

The key headlines from the new Code and Bill are as follows:

• The moratorium on forfeiture of commercial leases and the presentation of winding up petitions for unpaid rent continues until March 2022. 
• Rent arrears built up during the pandemic, from 21 March 2020 until the date on which the last restrictions were removed from the tenant’s industry sector, will be ring-fenced. The existing restrictions on the presentation of winding up petitions and the exercise of CRAR in relation to these ring-fenced pandemic arrears will continue, and in addition the new Bill will prevent landlords from issuing court proceedings and from drawing down on rent deposits to recover these arrears. The Bill, once passed, will stay any court proceedings commenced in relation to ring-fenced debts on or after 10 November 2021. 
• Landlords and tenants should continue to negotiate to try and reach agreement over the payment of pandemic-related arrears. If parties cannot reach agreement, they can refer their dispute to a new, binding arbitration scheme. Both parties will be expected to make proposals for how arrears should be settled, taking into account affordability and the viability and solvency of both the tenant’s business and also the landlord going forward. Both parties will be expected to produce supporting evidence.  
• Landlords and tenants are expected to act transparently, collaboratively, reasonably and responsibly to reach a swift resolution. At all times the aim should be to preserve viable businesses. 

The reforms will be welcomed by commercial tenants, particularly those in the hardest hit sectors. Equally though, many will be querying whether the Government has achieved the right balance between protecting tenants and the severe curtailment of the rights of commercial landlords – many of whom are also small businesses.