Government’s proposed new arbitration scheme for Commercial Landlords and Tenants

It was recently announced by the Government, that they intend to set up a new arbitration scheme to help commercial landlords and tenants settle disputes regarding rent arrears that have arisen as a result of the Covid-19 pandemic and subsequent lockdowns.

The intention of the arbitration scheme is that it will be “underpinned by law, providing commercial tenants and landlords with peace of mind that Covid-related rent debts will be settled fairly, and with finality” according to the Business Secretary, Kwasi Kwarteng.

The arbitration scheme will provide a binding decision on landlords and tenants, but will operate only as a last resort. The Government’s default position remains one of encouraging landlords and tenants to come to their own mutually beneficial agreements in regard to rent arrears, with the Government stating that these rent arrears should be ring fenced and allowances should made. Examples of such suggested allowances include extended repayment plans or a proportion of the total amount of rent arrears being waived.

It is only then, if such an agreement cannot be reached, that the parties must engage in arbitration so that a binding decision can be made which the parties must adhere to.

This new arbitration scheme will be delivered by private arbitrators, who must prove their impartiality, in accordance with guidelines outlined by legislation, which is unlikely to be delivered until Spring 2022.

Whether there will now be a rush prior to Spring 2022 to issue proceedings before the arbitration scheme comes into force remains to be seen, particularly while there is little costs recovery information currently available relating to the arbitration scheme. However, it does provide some hope of landlords and tenants being able to resolve their rent arrears related disputes without recourse to the courts. Please see our other blog relating to commercial rent arrears.

If you have any queries about this matter, please contact Joanna Osborne or any member of the Property Litigation team.

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