The Department for Business, Energy and Industrial Strategy has published a working draft of statutory guidance on how arbitrators should exercise their functions under Part 2 of the Commercial Rent (Coronavirus) Bill.
The Bill is currently progressing through Parliament and is expected to receive Royal Assent by the 25th March 2022, when the moratorium on forfeiting commercial leases for arrears of rent ends.
The Bill establishes an arbitration system to resolve certain unpaid rent debt (which includes service charge, insurance and annual rent) which are attributable to the pandemic.
The Bill will enable an arbitrator to award different forms of relief where the matter has not been resolved between the parties.
The current draft guidance contains an explanation of the provisions of the Bill which are relevant to arbitrators and provides an initial explanation (paragraph 7.4) of the concept of the arbitrator’s assessment of the:
“viability of the business of the tenant and the landlord’s solvency”.
The lack of clarification of what “viability of the business of the tenant” means has been a major issue with the Bill as drafted, and it remains unclear even with the draft guidance what it means and what it does not mean.
We are told that this “viability” point will be further developed following input from stakeholders.
The government welcomes views on this draft guidance about any areas where it is thought that further clarification may be needed for arbitrators.
It remains to be seen if the government will amend the Bill to include the Lord’s proposed amendments (some of which address a number of current issues with the Bill) or to pick up on points that the Lords have not covered but which feedback has been given by stakeholders, for example:
Adjusting very tight timeframes:
Tackling the issues of inconstancies in arbitration decisions:
Ensuring the balance between publishing sensitive commercial information about parties’ financial positions and parties providing limited disclosure to prevent such information from being made public:
The government will publish a final version of the guidance once the Bill receives Royal Assent. We will provide a further update when this happens.
If you have any more questions or want more information regarding the commercial rent bill, you can contact our Property Litigation Team below.