The law on commercial property and COVID has changed – what could that mean for you?
The COVID-19 pandemic has had extensive consequences across the globe, with its rapid spread forcing the implementation of new policies and laws to adapt. As COVID restrictions and reliefs are being gradually lifted, it is important to consider what these changes can mean for you and your business.
The commercial property market is one of many areas that has been affected by COVID. Government imposed restrictions forced many businesses to close over lockdown, with high street shops and pubs being particularly affected by huge financial losses. Whilst tenants of vacant premises over lockdown may have been struggling to fulfil their obligations under a lease (whether it be making their agreed rental payments or repairing the property up to the required standard), landlords have also suffered due to lack of income. Needless to say, there have been many landlord and tenant disputes brewing throughout this period.
Code of Practice
The government published a Code of Practice for Commercial Property Relationships During the COVID-19 Pandemic, which provides useful guidance on how non-payment of rent should be approached. The Code promotes transparency and collaboration between the landlord and tenant, stating that the parties should be reasonable and responsible when working towards resolution of a problem. A swift resolution is encouraged, and court proceedings should be the last resort.
Whilst this Code of Practice has been useful, abiding to its contents is voluntary. The courts have rejected the idea that a parties’ non-compliance with it should be taken into account when addressing the legal issues at hand (Commerz Real Investmentgesellschaft v TFS Stores Ltd [2021]). It must also be noted that the Code only applies to breaches of payment obligations; not to breaches of repair and/or maintenance obligations.
End of the Moratorium
In an effort to protect struggling tenants and save jobs, the government also imposed a moratorium on evicting tenants (by forfeiting their leases) from commercial premises. This has been extended twice, and now two years after its implementation, it has finally come to an end as of 25 March 2022 – coinciding with enforcement of new legislation – The Commercial Rent (Coronavirus) Act 2022.
Legally Binding Arbitration
The Commercial Rent (Coronavirus) Act 2022 came into effect on 24 March 2022, with its terms reflecting the Code outlined above. The legislation is concerned with resolving unpaid rent disputes caused by COVID, and offering a legally binding arbitration process to eligible landlords and tenants. If you are a landlord or tenant affected by a dispute of this kind, what does that mean for you? The government have made clear that a tenant capable of repaying their arrears should do so – however, a landlord may be expected to share the financial impact of the pandemic with the tenant.
If you are a landlord or tenant in a dispute over unpaid arrears, and you are unsure what the recent changes in legislation mean for you, please contact our experienced Dispute Resolution Team for legal advice.
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