BREAKING: Further detail on new Covid-19 rent arrears arbitration scheme

In its press release on 16 June 2021, the Government extended the Covid-19 moratorium on forfeiture of leases for arrears until 25 March 2022. At the same time it announced that it was going to create a binding arbitration process to come into force next year to decide disputes between landlords and tenants over the compromise of rent arrears – some of which will have been outstanding for nearly two years.

Yesterday (4 August 2021), the Government published a further policy statement giving the first indication of the shape of this new arbitration service. Much of the detail of the process is still yet to be released. However, some of the key takeaways from the policy statement are as follows:

• Prior to the arbitration process being put in place the Government will put an updated Code of Practice into legislation, which will provide a framework for negotiations between landlords and tenants.
• Where possible, landlords will be expected to share the financial burden of Covid-19 with tenants, by deferring or waiving rent that accrued whilst tenants were unable to trade.
• The new arbitration process is intended to be a quicker and easier way of resolving disputes, compared to court proceedings.
• The arbitration process is intended to be a last resort with the Government intending for parties to reach consensual agreements where possible.
• If a party has not negotiated in good faith, in accordance with the principles of the Code of Practice, and presses ahead with arbitration, the arbitrator may be empowered to penalise them with a costs order.
• Where parties have negotiated in good faith, but have been unable to reach an agreement, they will each be expected to bear their own costs of the arbitration process.

We will keep you updated as and when further details are released. In the meantime, if you have any queries in relation to any of the above, or any outstanding rent disputes, do get in touch.