We have recently seen what may be the first award made under the arbitration scheme established under the Commercial Rent (Coronavirus) Act 2022. Ernest Jones and H Samuel, jewellery retailers, has been ordered to pay £450,000 in unpaid office rent, where it had been argued that the offices, its headquarters, served purely to support its retail business and were in effect ancillary to that business.
The Act provides relief for tenants in respect of the payment of “protected rent debt” for a period of six months from 25 March 2022. Protected rent is rent that was due from a tenant during any period where the tenant’s premises were subject to enforced closure or other government coronavirus sanctions, broadly between March 2020 and July 2021. It was designed to apply to the retail and leisure sector, who businesses were hard hit by closures and restricted trading.
Under the Act, either the landlord or the tenant is able to refer the matter of a protected rent debt to arbitration within the six month period from 25 March 2022. Until either the six months has passed without any reference to arbitration or an award has been made in the arbitration, the landlord is prevented from pursuing the debt by court action, insolvency, forfeiture or Commercial Rent Arrears Recovery.
In the Ernest Jones case, the arbitrator said that the business carried on from the particular premises was offices (whether or not the main business of the tenant was retail) and as the premises were therefore not subject to closure requirements, there could not be any protected rent debt. On this the Act is clear.
Arbitrations so far have been rarer than hens’ teeth. As expected, most landlords and tenants have already come to an agreement over rent arrears or, unfortunately, struggling tenants have succumbed to insolvency – the figures for company voluntary liquidations are up well over 100% year on year. Those tenants that do still have unpaid protected rent and have deep enough pockets may well be waiting until August to go to arbitration, in order to buy themselves even more time to pay while the arbitration process is ongoing beyond September.