Commercial Rent Arbitration: The Scores Are In

Posted on Dec 13, 2022. by NTI

The Commercial Rent (Coronavirus) Act 2022 introduced an arbitration scheme with the aim of resolving disputes over outstanding rent arrears falling due in periods when lockdown restrictions were in force (known as 'protected rent debts'). If you missed it you didn't miss much, according to the Property Litigation Association which reported a fairly miserable uptake, and the scheme fizzled out on 24 September of this year.

The limited number of published arbitration awards highlight the narrow scope of relief afforded to tenants who were referred to the scheme. In fact, we can go one further than that; all of the published rulings were found in favour of landlords under grounds including:

  • There was no protected rent debt under the scheme
  • Tenants had a tendency to put fingers in their ears and shout "La la la ...", when asked to negotiate, or to pay any rent at all
  • It was the landlords' turn, having whinged so interminably for the past three years

At the time the arbitration scheme entered the statutory arena there was around £9 billion in debt owed by tenants to commercial landlords and it appears that number has reduced hardly at all. Some observers consider that knowing how temporary the scheme was always meant to be most landlords simply bided their time and waited until 25 September, when they could begin to plot how to get the rent they are owed without all of that pesky middle-class arbitration.

So, what is it to be landlords? Be reasonable and chat through payment terms with hopelessly indebted tenants, or push them into an insolvency intervention? Those of us occupying our glorious profession know all about the rise in Creditors' Voluntary Liquidations, by far the most likely route one to getting any outstanding rent back at all. 

The Insolvency Service's published figures reported that August 2022 saw an increase of 550 percent in the number of Company Voluntary Arrangements and an increase of 111 percent in the number of Administrations compared to the same period during 2021. However, neither of those come close to the rise in CVLs and with the retail sector appearing to be in a tailspin yet again (during their 'busy season'), hospitality and leisure will surely follow suit in the first quarter of 2023.

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