Property Disputes and Rent Arrears Post COVID-19
As a property disputes lawyer, a large proportion of my time over the last 18 months or so has been spent advising both landlords and tenants on rent arrears that have accrued since the start of the pandemic.
Looking back to last March, the Government had to act quickly to help business tenants who could not pay their rent due to lockdown(s). The Coronavirus Act 2020, amongst other things, restricted a landlord’s ability to forfeit commercial leases due to non-payment of rent (forfeiture allows landlords to terminate the lease by peaceably re-entering the premises and taking possession). That restriction was extended on various occasions and continues until 25 March 2022. Although, as an aside, landlords can still seek to forfeit where there are other breaches of the lease.
There are ongoing issues between many landlords and tenants regarding rent arrears (which can be substantial) that have accrued during the course of the pandemic and the periods of lockdown. In June 2021, the Government announced that it planned to bring in a binding arbitration process to help with rent arrears claims/ disputes between landlords and their tenants.
On 4 August 2021, a policy statement was published which provides some further clues on how this may all work. The detail will be made known in due course. It is understood that rent arrears accruing during Covid-19 restrictions are to be ‘ring-fenced’ and the parties will need to engage in a mandatory arbitration process if negotiations prove fruitless.
It is difficult to provide a detailed analysis within the confines of a (mercifully) short and snappy article, but key points to note include:-
- There will be a further Code of Practice intended to govern negotiations between the parties, who will be required to ‘negotiate in good faith’
- Landlords should, where possible, share the burden and defer or waive rent arrears
- The arbitration process should be used as a matter of last resort and there can be costly penalties if a party is found to have failed to negotiate in good faith
It should also be noted that it is made clear that tenants should now be paying rent given that all restrictions have been lifted.
If they have not done so already, landlords should seek the advice of a property litigation solicitor as soon as possible to determine the action that they could or should take in the meantime to protect their investment. Similarly, tenants should also seek advice on how they can protect their position and ability to trade from the premises.
It is often a balancing act between the two parties, however finding new tenants and adapting any premises can be costly and time consuming. With the right negotiations and support it is possible that both sides can come through the other side relatively unscathed and with their future assets protected.
If you are a landlord or a tenant who is dealing with rent arrears and need legal advice from an experienced property litigation solicitor, don’t hesitate to contact me directly by emailing jonathan.bouchta@GAsolicitors.com or call 01752 203500.