On 16 June 2021, the Government announced that the measures which were put in place to assist commercial tenants during the Covid-19 pandemic will be extended beyond 30 June 2021 by a further 9 months until 25 March 2022. This means that landlords will be unable to forfeit commercial leases on the basis of rent arrears until after 25 March 2022.
The Government also announced its intention to introduce legislation to "ringfence" rent arrears which have accrued due to businesses having to remain closed during the pandemic.
This announcement will hopefully encourage landlords and tenants to reach an agreement on unpaid rent arrears. However, the Government has confirmed its intention to introduce a binding arbitration process to settle rent arrears disputes in circumstances where a settlement cannot be reached between landlords and tenants. This will be a legally binding agreement which must be adhered to by both parties and we are awaiting details of the draft Bill in order to have a clearer understanding as to exactly how the process will work and to whom it will apply.
The Ministry of Justice has also confirmed that the restrictions on the use of Commercial Rent Arrears Recovery (CRAR) will also be extended. Currently, between 25 March 2021 and 23 June 2021, CRAR may only be exercised if at least 457 days' rent (i.e. five quarter's rent) is outstanding when the notice is given. On or after 23 June 2021, CRAR may be exercised if at least 554 days rent (i.e. six quarter's rent) is outstanding when the notice is given.
Unsurprisingly, the ban on serving statutory demands and winding up petitions will also be extended by 3 months to 30 September 2021.
In the meantime, the Government's message to commercial tenants is that those who are able to pay their rent should continue to do so. It is now essential that landlords and tenants continue to work together to reach an agreement if they have not already done so.
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