A rent arrears lifeline?

Peter Bell, CEO of The Commercial Tenants Association discusses why The Government’s binding arbitration must protect retailers

Action to stem the COVID 19 pandemic has hit UK retailers hard, with many facing a mountain of debt built up over the past 18 months. So, while a slow and precarious recovery may now be in sight, British retail businesses are still in need of protection, with significant fears that good businesses will fall without further support.

With the Government currently consulting landlords and tenants for a binding arbitration solution for rental debt, The Commercial Tenants Association (CTA) is calling on the Government to implement a framework that ensures all businesses are included in the process.

Peter Bell, CEO of the CTA, says that the aim should be to fairly protect the interests of both landlords and tenants so that all parties benefit from a clear and workable solution to the £7bn rental arrears issue.

“It is essential,” says Bell, “that the period of rental arrears accumulated due to the pandemic response measures are prescribed and the debt accumulated in this period ringfenced for consideration for prospective arbitration.”

He believes that an updated and mandatory Code of Practice for landlord and tenant relationships should be published urgently to outline how negotiations should be conducted and must include clear principles and timescales.

He also suggests that landlords offer tenants rent relief where it is fair and reasonable to do so: “The parties must also negotiate in good faith with a view to agreeing the rental relief to apply during the prescribed period, including any arrears of rent or other sums due under the lease.”

Ultimately, he says, arbitration should be the last resort, as a revised and more robust Code of Practice should result in more cases being settled by negotiation. “Time is of the essence,” he warns. “Business survival and people’s livelihoods are at stake; so the Arbitrator’s award should be published within 28 days of the parties’ submissions.”

As a means of interim protection whilst this legislation is being formed, Bell says that commercial landlords should be prevented from taking enforcement action on leasehold debt or pursuing other remedies during the prescribed period, but that these protections should not apply if the tenant has substantially failed to comply with their own obligations under the Code of Practice.

“We genuinely hope that these proposals will assist the government in drafting legislation and publishing further guidance – helping all parties to reach an agreement on the leasehold debt mountain,” Bell adds.

“It is essential that retailers, who are the life blood of our cities, town centres, communities and the wider economy, are thrown a lifeline through a fair resolution framework for rent arrears. Many thousands of jobs, and the health of the wider economy, depends on it.”

This was first published in Retail Destination Fortnightly. Click here to subscribe.

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