Hospitality sector welcomes new law to help tackle commercial rent arrears

The introduction of new legislation to protect businesses forced to close or partially close during the pandemic has been welcomed by a leading hospitality trade body.

UK Hospitality said the Commercial Rent (Coronavirus) Bill is decisive Government legislation to deal with the £7 billion-plus rent debt accrued during the pandemic by businesses across all sectors, with hospitality particularly badly hit.

A general moratorium on commercial evictions in England and Wales ended on 25 March.

The moratorium on the Commercial Rent Arrears Recovery (CRAR) rules, was introduced in 2020 as a temporary measure as the country was locked down by the COVID-19 pandemic. It was extended on 16 June 2021.

CRAR, which came into force on 6 April, 2014, allows landlords of commercial premises to recover rent arrears by taking control of the tenant’s goods and selling them.

The new Commercial Rent (Coronavirus) Act 2022, introduced on 24 March is designed to help resolve certain remaining commercial rent debts caused by the pandemic, which particularly affects those in the hospitality and leisure industry who were forced to close their doors.

Businesses remain protected for six months

Under the new legislation, the Government says eligible firms remain protected for the next six months during which arbitration can be applied for or until the conclusion of arbitration.

UKHospitality Chief Executive Kate Nicholls said: “These are very welcome new laws for the hospitality industry. And as our sector tries to recover, it’s imperative that rent debt is dealt with, otherwise it’ll hamstring our recovery.”

How does the new law work?

The new law means a legally binding arbitration process will be available for eligible commercial landlords and tenants who have not already reached an agreement. This will resolve disputes about certain pandemic-related rent debt and help the market return to normal as quickly as possible.

The law, which applies to England and Wales, covers commercial rent debts of businesses including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be within the scope.

What was the purpose of the moratorium?

The moratorium was part of Government measures designed to provide firms with breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic.

The main objective in doing so was to protect jobs, by allowing businesses to continue to trade while struggling to pay their rent, while at the same time, encouraging landlords and tenants to resolve debt issues through negotiation or arbitration.

Clear process for settling rent arrears

Last year, the government published an updated Code of Practice to provide commercial landlords and tenants with a clear process for settling outstanding debts.

The Code sets out that tenants who can pay their rent debt in full should do so, and that in the first instance, tenants unable to pay in full should negotiate with their landlord in the expectation that the landlord shares the burden where they can do so, and only as far as necessary, by waiving some or all rent arrears or giving time to pay.

UKHospitality represents more than 730 companies operating around 85,000 venues in a sector that employed 3.2 million people prior to COVID.

For help and advice with related matters, please get in touch with our expert team today.