Commercial Rent (Coronavirus) Bill: Arbitration Process– What will you need to do?
25 February 2022 by Emily Wickington
We have previously discussed the possible impacts of the Commercial Rent (Coronavirus) Bill (‘the Bill’) which is currently passing through Parliament (The Commercial Rent Arrears Crisis: what can landlords do? – FJG / Update: The Commercial Rent Arrears Crisis: what can landlords do? – FJG). On 23rd February 2022 the Department for Business, Energy & Industry Strategy has published a working draft of statutory guidance to arbitrators about the exercise of their functions under Part 2 of the Bill. This guidance (once published) will be produced in the Bill to guide the arbitrators through the exercise of their functions.
Part 2 of the Bill will contain the statutory arbitration process that will apply in England and Wales. This process will be split into 3 stages.
Stage 1: The Pre-arbitration stage
This is intended to give the parties the opportunity to negotiate and settle between themselves before going further to arbitration. The information provided in the draft guidance links heavily to the process which must be followed when making a reference to arbitration.
- Who can make a reference?
- Either a Landlord or a Tenant may make a reference; however this is subject to some exceptions.
- By when must a reference be made?
- Within 6 months beginning with the day the Bill is passed. This is due to be by 25 March 2022 subject to parliamentary approval. This time period may be extended by Secretary of State Regulations.
- What steps must be taken before a reference is made?
- The party wishing to make the reference must notify the other party and then wait for the relevant time period based on whether they receive a response from them.
- How is a reference made?
- The relevant party must give the reference in writing to an approved arbitration body along with the arbitration fees and a formal proposal for resolving the matter of relief from payment of a protected rent.
- With regards to appointing arbitrators, the parties may agree the number but if they fail to do so then a sole arbitrator will be appointed.
Stage 2: The Eligibility stage
The guidance will help arbitrators to determine what tenancies and rents are eligible based on the below criteria:
- The tenancy is a “business tenancy”
- The rent is a “protected rent debt”
- As mentioned in previous posts this is the rent arrears in respect of periods where business were forced to close, cease trading or restrict trading due to the pandemic.
- The parties have not reached an agreement on the matter of relief from payment of the “protected rent debt”
- The relief could include any of the following; writing off the debt, giving the Tenant time to pay (possibly in instalments), and reducing or writing off the interest payable.
- The tenant’s business is viable or would be so if given relief from payment of the “protected rent debt”
- The guidance provides a non-exhaustive list of evidence to demonstrate tenant viability.
Stage 3: The Assessment and Award stage
In this stage the arbitrator determines whether the Tenant should be given any relief and if so what that relief should be. No statements of claim or defence are submitted, instead both parties just submit their formal proposals for resolving the matter which are then used by the arbitrator to make the award.
If you would like to read the full guidance document you can find it here: https://www.gov.uk/government/publications/arbitration-on-rent-debt-relief-for-businesses-affected-by-coronavirus
If you are a tenant or a landlord, and would require some guidance relating to your options under the Bill once it is passed, please do get in touch with our commercial property team on 01206 835316 or email [email protected]
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