Commercial Arrears - Commercial Rent (Coronavirus) Act Part 2 – The Arbitration Process

An application for the arbitration process to start can be made by either the Landlord or the Tenant relating to the protected rent. This application would need to be made within six months starting on the date that the Act comes into force and can only be made after having informed the other party of your intention to use the process.

Theoretically, once this six month period expires, the adjudication process will not be available again and so time is of the essence with these applications. Practically speaking through, this timeframe is more likely to be determined on the amount of applications made and the adjudicator’s ability to handle the cases. We are not far removed from various pieces of temporary legislation which were extended multiple times to satisfy the needs at the time. Whilst I would not be surprised to see this, if you believe that adjudication is going to be needed, then I would not rely on a definite extension given that there is no guarantee such an extension is ever going to be needed.

The arbitrator’s role is to try in so far as possible, account for the key principles. These are that any award should with a view to preserving the viability of the business whilst protecting the solvency of the Landlord. The amount awarded should be the maximum amount possible whilst achieving this.

If the arbitrator decides that there is unpaid rent for the relevant period and that the tenant would be a viable business but for the rent debt, then the arbitrator will consider the circumstances and the proposals of the parties before reaching a decision. The arbitrator will consider the proposals put forward by the parties against the principles referred to above. As such:

• If only one proposal made by the parties is consistent with the principles, the arbitrator will adopt that in the award. 
• If the proposals made by both parties are consistent with the principles, the arbitrator must adopt the one they consider is most consistent.
• If neither party’s proposal is consistent, the arbitrator must make whatever award they consider is appropriate.
• The arbitrator’s award may provide for some or all the protected debt to be paid by instalments for no longer than 24 months, to be reduced or even extinguished entirely.

This means that the arbitrator has a very wide remit and the having the application and submissions referring the key points in the principles and addressing the main considerations of the scheme will be a determining factor in the amount that will be awarded.

In the final introductory blog on this topic we will be covering what actions in terms of enforcement are now restricted.