Landlords: Again. JIEB Candidates be Warned

Posted on Aug 17, 2021. by NTI

Do you remember those heady days when 'L' stood for 'lycra' and 'lefties'? Now you can't turn around in the NTI newsroom without bumping your head on a story about 'landlords' - they are all over the newswires and, we predict, will be the biggest part of any job you take on after the wave breaks.

JIEB candidates in November be warned; revise landlords, rents and the ever growing issue of arrears.

On 4 August the Ministry of Housing, Communities and Local Government issued a policy statement on the announcement to ringfence COVID-19 commercial rent debts and introduce binding arbitration. When you stick a wet finger in the air you get wind of a figure of around £6 billion, give or take a few hundred million, in respect of current rent arrears and you can see why landlords are getting a little jittery. 

The statement continues to encourage landlords and tenants to try to reach agreements in the meantime, indicating that the planned system of binding arbitration should be a last resort. This is a little like a Government statement continuing to encourage parents to feed their children and prevent them from playing with naked flames, but apparently it needs to be said. The policy statement also suggests that agreements should either defer or waive entirely an appropriate proportion of arrears owed for the relevant period of business closure.

The call for evidence earlier this year resulted in more than 500 responses, most of which are more predictable than the result of a straight fight between Galal Yafai and a wet paper bag. The majority (61 per cent) of respondents either disagreed or strongly disagreed that the current Government Code of Practice is effective. Almost 70 per cent of these respondents were tenants and the key change sought was for the Code to be made legally enforceable, in order to make it effective. (We are missing out the words 'blah, blah, blah' at the end of that last sentence, but they are inferred.)

You are in need of a pithy summary here, so the main takeaways from the Government's polisy statement are:

 *Parties can expect to see a ‘strengthened’ Government Code of Practice published to outline the intended future principles of the legislation and encourage further negotiations before binding arbitration is introduced

*The ban on forfeiture will continue until 25 March 2022, unless legislation is passed ahead of this, to allow time for the parliamentary processes

*The Government is clear that tenants should pay where they have not been affected by closures and have the means to pay (oh and, by the way, they are also contractually obliged to do so) normal contractual arrangements are expected to return for such tenants from 25 March 2022, including liability for interest (note that, tenants: interest will be added, it isn't a free loan)

*Even for tenants affected by closures, the expectation is that they should begin paying rent (and interest) as required by their lease from the point at which restrictions were lifted for their sector

*Forfeiture is expected to return as a remedy for any rent arrears owed outside of a ‘ring-fenced’ period

*Although we await details of the proposed binding arbitration system, it is expected that it will include a power to award costs where either party fails to negotiate within the spirit of the legislative principles

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