Throughout the current COVID crisis the Government has sought to protect commercial tenants (and their businesses) from enforcement action by landlords for failure to pay their rents. Many thousands of tenants and landlords have agreed concessions which either defer or reduce the amount of rent due, but a significant number are still actively in dispute about the amounts to be paid.
Derwent reports that 96% of its office rents have been collected, compared to 64% from its retail and hospitality tenants with 15% outstanding.
As matters stand, landlords may not forfeit tenants' leases for rent arrears until the end of March 2022 and they are also barred from presenting winding up petitions for rent (and any other sums due from a tenant under a lease). Meanwhile, there are no restrictions on landlords issuing money claims through the Courts and we have seen a number of high profile Court judgments against tenants, most recently the tenant of the Trocadero.
The Government's plan (so far as we are aware) is to ring-fence these "COVID arrears" and to refer any ongoing disputes to arbitration. We have very few details about how this scheme will work in practice, and whether the arbitrator will be asked to decide how much of a discount a tenant "deserves" (presumably based on its drop in revenue during lockdown) or how much a landlord can afford?
Reports in the property press indicate that the Government will issue a revised Code of Conduct soon which should give some clarity over its proposals. In the meantime, landlords are rushing to the Courts to issue their claims in the hope that they will get a better result from a judge than an arbitrator.
We hope to hear further details soon, and will update once we know more.