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Recovering Commercial Rent Arrears incurred during Covid-19

April 10, 2022

The last two years have been quite the rollercoaster for everyone but whilst most businesses are tentatively getting back on their feet, commercial Landlords would be forgiven for wondering when the restrictions on rent arrears recovery imposed by section 82 of the Coronavirus Act 2020 might be lifted allowing them to partake in the recovery.

Enter the Commercial Rent Coronavirus Act 2022 (“the Act”) which has just received Royal Assent on 24 March 2022. The Act is intended to support Landlords and Tenants in resolving disputes relating to commercial rent arrears accrued during the pandemic.  

Below we set out the key takeaways allowing Landlords to consider their next move:

  1. Restrictions on Landlords’ enforcement options imposed by the Coronavirus Act 2020 ended on 25 March 2022 and the Act replaces these restrictions with a new approach that prevents Landlords from exercising the usual remedies in respect of certain ringfenced rent arrears incurred during the period set out in point 2 below.
  • The Act relates to rent arrears incurred during the period from 21st March 2020 up until 18th July 2021 (dependant on the tenant’s business) which we shall refer to as the ‘Covid Period’. The arrears can also include service charge, insurance rent, interest and VAT.  Any amount drawn down by the landlord from a rent deposit to meet the whole or part of the rent debt can also be included. Any arrears falling outside of the Covid Period can be dealt with in the usual manner, and commercial rent arrears recovery can be applied.  
  • If the Landlord and Tenant have not been able to reach an agreement between themselves on the payment of arrears, the Act introduces a binding arbitration process to help resolve claims for rent arrears that have accrued during the Covid Period.
  • There is also a code of practice in place that is not binding but gives guidance on how parties should approach negotiation with the intention that, where possible, they should resolve rent disputes before arbitration is required.  
  • The overarching gist of the Act is that Tenants who can pay their rent in full should do so, however where Tenants cannot pay in full the Government’s intention is that the rent accrued as a result of the pandemic should not force an otherwise viable business to cease operating. Therefore lease obligations should be recognised as far as possible but, where Tenants cannot pay in full, the Act and the code seek to compel Landlords and Tenants to share the financial burden proportionately.   In practice this looks like negotiation in the first instance between the Landlord and the Tenant with the expectation that the Landlord will share the burden where they can, and where parties are still unable to reach agreement the dispute can be referred to statutory arbitration.  The arbitrator will decide whether the Tenant should receive relief from payment.  
  • This puts pressure on parties to reach an agreement without having to have an award imposed upon them and for both parties to engage properly within the negotiations else risk having a less advantageous award made for them. 
  • Arbitration awards will be based on the principles of viability and solvency.  Therefore, if the Tenant’s business is not deemed viable, the arbitrator must dismiss the case.  This is intended to discourage Tenants from overstating the impact of the pandemic.
  • Each party will have to pay their own legal costs for the arbitration process which is another incentive for both parties to try and resolve matters before going down the arbitration route.

If you are a Landlord and wish to discuss how to recover commercial rent arrears, please contact our commercial property team on 0121 7057571 or email

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.