Landlord & Tenant Update – New Policy on dealing with ‘pandemic arrears’

Landlord & Tenant Update – New Policy on dealing with ‘pandemic arrears’

This article was published on: 23rd August 2021

The Government has released its new policy statement[1] on how landlords and tenants can and/or will be expected to deal with “pandemic arrears.”

The key points from that announcement are:-

  • The current moratorium on commercial evictions for rent arrears will remain in force in respect of all rent debts until March 2022 or until new legislation is released, if that is sooner.

 

 

  • New legislation is to be passed ringfencing “pandemic arrears” which means rent debt accrued by tenants impacted by pandemic closures from March 2020 until the end of the sector-specific closure restrictions (broadly April – June 2021);
  • Tenants not affected by business closures are required to pay arrears in full and will no longer be protected once legislation is passed;
  • Following the new legislation, the moratorium on commercial evictions will remain in place in respect of the pandemic arrears only.  The moratorium will come to an end in respect of other debts accrued pre-March 2020 or post lifting of restrictions.
  • The Government expects landlords and tenants who have been affected by business closures to agree to defer or waive entirely an appropriate proportion of the “pandemic arrears”.  A revised Code of Practice will be introduced to assist with those discussions. Landlords are expected to ‘share in the financial burden’ and give tenants breathing space to agree new terms; however, tenants who can pay, should pay.
  • If parties cannot agree how to deal with pandemic arrears, they can use a binding arbitration process to decide the dispute.  The arbitrator will have the ability to award costs however costs will generally be shared equally provided both parties have acted in good faith.
  • Arbitration is to be seen as an option of last resort used only where negotiations have failed.

What does this mean?

  • All debts which are not ringfenced as pandemic arrears must be repaid by tenants in full unless landlords have agreed to waive those debts.
  • Landlords will soon be able to evict tenants who have not been affected by business closures for non-payment of rent accrued at any time. Landlords will also soon be able to evict tenants who owe arrears pre-dating March 2020 or post-dating the lifting of restrictions.
  • Landlords and tenants affected by closures are required to agree to repay / defer / waive “pandemic arrears.” If agreement cannot be reached, arbitration can be used to resolve the dispute.

[1] https://www.gov.uk/government/publications/resolving-commercial-rent-arrears-accumulated-due-to-covid-19/supporting-businesses-with-commercial-rent-debts-policy-statement

Author: Amy Light, Associate

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