COVID-19 commercial rent arrears arbitration: first published award

Posted Thursday 14th July 2022

One of the many effects of the pandemic was the forced closure of many businesses, resulting in commercial tenants accruing substantial rent arrears.

The Commercial Rent (Coronavirus) Act 2022 (“the Act”), enacted on the 24 March 2022, introduced a binding arbitration process to resolve disputes over commercial rent arrears that accrued during the COVID-19 pandemic.  The scheme applies to all charges due under qualifying business tenancies during the period when businesses were forced to close as a result of the pandemic.

empty office

The eagerly awaited first arbitration award under the arbitration process was published on 12 July 2022.

The tenant occupied around 450 retail premises across the UK that were subject to forced closure orders during the pandemic. However, the arbitrator was required to determine whether rent arrears relating to the tenant’s office premises of £450,000 amounted to a debt protected under the Act.  The majority of the tenant’s staff at the office premises had been placed on furlough during the pandemic with only 35 members continuing to work at home. Only two members of staff continued to work at the premises throughout.

As the premises in question were offices, which were not subject to a mandated closure by law, the arbitrator ruled that there was no “protected rent debt” and the arbitration was dismissed.

Whilst the Act has only been in force for a little over three months, the decision is a likely indicator that rent arrears for office premises are not a “protected rent debt” under the Act and that office occupiers are unlikely to secure relief from payment of rent arrears under the arbitration process.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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