Businesses that built up rent debt during the Covid-19 crisis were – until last week – protected from creditor enforcement action.

Businesses including pubs, gyms and restaurants have built up an estimated rent bill of £8.5bn in this time.

Last week, the Government introduced new legislation to try and address this debt pile, without causing long-term damage to businesses in some of the worst-affected industries.

At the same time as the general moratorium on commercial evictions and restrictions came to an end on Thursday 24 March, the Commercial Rent (Coronavirus) Bill came into effect in England and Wales.

This new law provides a legal procedure for remedying some commercial rent debts through an independent arbitrator.

Where possible, the government says that commercial landlords and their tenants should try to negotiate a mutual agreement. Where the parties can’t come to an agreement, however, the landlord or tenant can seek out an independent arbitrator who will help reach a resolution.

Crucially, only some types of debt are subject to this process. These ‘Protected Rent Debts’ are any unpaid rent accumulated during the period when a business was obliged to close due to coronavirus restrictions.

Any rent that went unpaid during periods without any national, local or sector-specific ‘lockdowns’ is subject to normal legal procedures.

Business Minister Paul Scully said: “This new law will give commercial tenants and landlords the ability to draw a line under the uncertainty caused by the pandemic so they can plan ahead and return to normality.

“Landlords and tenants should keep working together to reach their own agreements where possible using our Code of Practice to help them, and we’ve made arbitration available as a last resort. Tenants who can repay their rent debts in full, should do so, and when they cannot, landlords should try to share the burden, so we can all move on.”

Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency, said: “The last couple of years have been difficult for businesses and landlords alike. I know in a high percentage of cases, relationships will have been stretched to breaking point, but now is the time to come together and talk it out.

“Arbitration can be a lengthy process and it can only be used to tackle ‘protected’ rent debt. For me, landlords and businesses need to do everything in their power to reach a bilateral agreement that works for everyone.”

For more information and advice around commercial rent debts, speak to a member of the team today. Call: 0800 611 8888.