Commercial Rent (Coronavirus) Act 2022: Q&A about protected rent

Under the Commercial Rent (Coronavirus) Bill, if the protected rent period runs to 18 July 2021, and a service charge demand or rent demand is issued for the June quarter (24 June 2021 to 28 September 2021) in June 2021, will the whole demand be protected or just an apportioned part from 24 June 2021 to 18 July 2021?

References: Commercial Rent (Coronavirus) Bill (HL Bill 92) (parliament.uk)

The Commercial Rent (Coronavirus) Bill was introduced to Parliament on 9 November 2021 and is currently progressing through the House of Lords. It is anticipated to become law on or before 25 March 2022. The second reading of the Bill in the House of Lords is scheduled to take place on 27 January 2022. Further amendments could be made to the Bill before it becomes law.

The Bill provides that any rent and service charge arrears which have accrued due in respect of a business tenancy during periods of enforced closure are protected under the Bill and subject to a binding arbitration scheme. There are restrictions imposed on a landlord in respect of the action which can be taken to recover arrears which fall within the scope of the Bill.

Section 2 states that the Bill will apply to both rent and service charge payable under a business tenancy. A 'protected rent debt' is defined in section 3 as a debt under a business tenancy consisting of unpaid protected rent.

Section 5 defines the ‘protected period’ as beginning with 21 March 2020 and ending on the last day when the premises was subject to a forced closure requirement (provided that that date was before 18 July 2021) or in any other case, 18 July 2021. Therefore, the latest date under the Bill for expiration of the protected period in respect of any business tenancy is 18 July 2021.

Section 3(2) states that rent will only fall into the category of protected rent if two conditions are satisfied:

1. The tenancy was adversely affected by coronavirus, and
2. The rent is attributable to a period of occupation by the tenant during the protected period.

Section 4 contains the definition of 'adversely affected by coronavirus'. In broad terms, a tenancy was adversely affected by coronavirus if it was subject to forced closure under coronavirus legislation.

Section 3(5) deals with apportionment of arrears. It states: ‘…if any rent due under the tenancy is attributable to a period of occupation by the tenant of which only part is of the description in subsection 2(b), then so much of the rent as can be reasonably attributed to that part of the period is protected rent.’ This means that where rent or other sums protected under the Bill fall due on a date within the protected period but cover a period beyond 18 July 2021, those sums are to be apportioned so that only the rent for a protected period is classed as protected rent under the Bill.

Applying this provision to the question, only the apportioned part of the demand from 24 June 2021 to 18 July 2021 is protected rent under the Bill. The rent for the period 18 July 2021 to 28 September 2021 is not protected rent and therefore falls outside of the scope of the binding arbitration scheme under the Bill.

For further guidance, see:

Practice Note: Coronavirus (COVID-19)—implications for property

News Analysis: Pandemic rent recovery—analysis of the proposed arbitration scheme

Since this content was first published, the Commercial Rent (Coronavirus) Bill has received Royal Assent. It became law on 24 March 2022.  A link to the Commercial Rent (Coronavirus) Act 2022 can be found here. Please note that the links in the article relate to Lexis PSL content so will only be available to subscribers of that service.

This content was first published on the Lexis Nexis Ask Forum. For more information please contact Laura Bushaway or your usual Charles Russell Speechlys contact.