Commercial Rent (Coronavirus) Act 2022

Commentary on provisions of Act

Part 1: Introductory provisions

Section 1: Overview

24. This section sets out the overall purpose and structure of the Act. Subsection (1) of this section sets out that the Act provides for a process of arbitration to be available to resolve disputes about relief for the tenant from payment of certain debts due to the landlord under a business tenancy. These debts are described as "protected rent debts" throughout the Act and resolution by arbitration is available in those cases where the tenant and landlord are not able to reach mutual agreement.
25. Subsection (2) introduces the different provisions of the Act and explains what they provide for:
    1. Sections 2 to 6 of Part 1 provide definitions of key terms used for the purposes of this Act;
    2. Part 2 establishes a process of statutory arbitration which can lead to awarding the tenant relief from payment of a protected rent debt;
    3. Part 3 provides for temporary restrictions on the availability of certain remedies that would otherwise be available to a landlord, and of certain insolvency measures that would otherwise be available to the parties, in relation to a protected rent debt.
26. Subsection (3) clarifies that nothing in the Act affects the ability of tenants and landlords at any time to reach agreement on the payment of a protected rent debt (or any other matter relating to the tenancy), nor does it prevent such an agreement having effect and being enforced. This means that while the Act enables relief from payment of protected rent debt through arbitration, it does not prevent the parties to a business tenancy from agreeing relief from payment through another process, whether before or during the arbitration process. Where they do reach agreement, arbitration under this Act is not be available.

Section 2: "Rent" and "business tenancy"

27. This section provides the definitions for rent and business tenancy for the purposes of this Act.
28. Subsection (1) defines "rent" as including an amount payable by the tenant to the landlord for possession and use of the premises, a service charge, including a payment towards an insurance premium, and any interest on an unpaid amount of rent as defined in (a) and (b) in this subsection.
29. Subsection (2)(a) explains that a reference to an amount under subsection (1) includes VAT.
30. Subsection (2)(b) states that the reference to "landlord" in subsection (1) includes a person acting for the landlord, such as a managing agent.
31. Subsection (2)(c) defines service charge for the purpose of subsection (1). This may include an amount payable in respect of certain services and costs which may relate to the premises or common parts, where required to be paid under the tenancy, and may include insurance costs, which is defined in subsection (3).
32. Subsection (3) also explains what is meant by "the relevant costs" mentioned in subsection (2)(c).
33. Subsection (4) states that an amount drawn down by the landlord from a tenancy deposit to meet part or all rent debt is treated as unpaid rent debt unless repaid by the tenant. Where the Act refers to paying rent then, for this situation, this should be understood to mean making good a shortfall in the deposit.
34. Subsection (5) defines a "business tenancy" as a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies. That is, a tenancy comprised of property which is or includes premises that are occupied by the tenant for business purposes, or business and other purposes, under section 23 of that Act.
35. Subsections (6) and (7) define Welsh and English business tenancies so that different provision may be made in respect of each.

Section 3: "Protected rent debt"

36. This section sets out what is meant by "protected rent debt" within the context of the Act.
37. Subsection (2) provides two conditions to be met for rent due to be considered "protected rent". The first of these is that the tenancy was adversely affected by coronavirus (the definition of this is set out in section 4). The second condition is that the rent due was attributable to a period of occupation within the "protected period" defined in section 5.
38. Subsection (3) states that rent consisting of interest due in respect of an unpaid amount (as described in section 2(1)) is attributable to the same period of occupation as that unpaid amount for the purposes of subsection (2) of section 3. This means that if a tenant is paying interest on rent due, the interest is considered to be from the same period of occupancy as the rent.
39. Subsection (5) sets out that if rent due is only partly attributable to a period of occupation as described in subsection (2), then only the rent due which is attributable to that period qualifies as "protected rent". This means that if there is rent due which is attributable to occupation by the tenant both outside the protected period as well as within the protected period, then only that which was within the protected period is regarded as "protected rent" for the purposes of the Act. The Act does not provide any protection for non-payment of the portion which is not reasonably attributable to the protected period. Whereas the portion which is attributable to the protected period can be addressed under the Act’s system (if other eligibility criteria are met), notwithstanding any provision in the lease requiring payment in full.
40. Subsection (6) states that unpaid protected rent is to be treated as including an amount drawn down from the tenancy deposit, as referred to in section 2(4). This means that the arbitrator can consider and make an award about this full amount and, depending on the award, the tenant may be relieved from having to make good any shortfall in the deposit.

Section 4: "Adversely affected by coronavirus"

41. See the table in Annex A for a summary of the position regarding territorial extent and application in the United Kingdom.
42. This section defines when a business tenancy is "adversely affected by coronavirus" for purposes of the Act.
43. Subsection (1) provides the conditions for when a business tenancy is adversely affected by coronavirus. This subsection means that if the whole or part of a business carried on in the premises comprised in the tenancy, or if the whole or part of the premises themselves, were subject to a closure requirement under coronavirus regulations during a "relevant period", then they are considered as being adversely affected by coronavirus.
44. The term "closure requirement" is defined in subsection (2)(a) and means a requirement to close either premises (or parts of premises) or businesses (or parts of businesses) specified in regulations and expressed as an obligation to close. Subsection (4) states that, for the purposes of subsection (2), it does not matter if certain limited activities were allowed as an exception to the closure requirement. If certain activities were allowed by regulations, this should be disregarded when determining whether a tenancy was adversely affected by coronavirus and so the tenancy still falls within the scope of arbitration under the Act. The concept of closure for these purposes is therefore relatively broad. However, the closure must have been required by regulations.
45. Under subsection (2)(b), a "relevant period" began at or after 2pm on 21 March 2020 and ended at or before 11.55 p.m. on 18 July 2021 for premises in England, or 6 a.m. on 7 August 2021 for premises in Wales. This means that if a business was subject to a closure requirement for any period within these times, then they meet the test. Many types of business were required to close for some periods within these times; they are adversely affected by coronavirus.
46. For the purposes of subsection (2)(a), subsection (3) states that a requirement to close either the whole or part of the business or premises at particular times every day can be regarded as a closure requirement. For example, some businesses were required to close their premises at a certain time in the evening until a certain time in the morning, during a relevant period.
47. Subsection (5) states that in a situation where a business is carried on not only at the premises named in the tenancy but also elsewhere, then this Act only applies to the portion of the business that was carried on at the tenancy premises. For example, if a tenant runs a restaurant business partly at the tenancy premises but also from the tenant’s own owned premises, then the relevant business for the Act’s purposes is just that part that was conducted at the tenancy premises.
48. Subsection (6) sets out that "coronavirus regulations" for the purposes of this section, must have been made under the power in section 45C of the Public Health (Control of Disease) Act 1984, either alone or under other powers too.

Section 5: "Protected period"

49. This section sets out what is meant by "protected period" and "specific coronavirus restriction" for the purposes of the Act.
50. Subsection (1) defines "protected period" as beginning with 21 March 2020 and ending with the day identified by subsection (2). That is, the last day of the protected period is the last day on which the business or part of the business, or premises or part of the premises, was subject to a closure requirement or a specific coronavirus restriction imposed by coronavirus regulations, in England or Wales as applicable. For England the last day cannot be later than 18 July 2021 and for Wales, 7 August 2021.
51. The term "specific coronavirus restrictions" is defined in subsection (3) as a restriction or requirement other than a closure requirement (as defined in section 4) imposed by coronavirus regulations. This restriction must relate to the way that the whole or parts of a businesses could operate or the way that the whole or parts of a premises could be used.
52. Subsection (4) states that for this purpose, general restrictions applying more widely than to specific businesses or premises are not "specific coronavirus restrictions". If a restriction applied to businesses generally or workplaces generally, then it would not be a specific coronavirus restriction. A requirement to display or provide information would also not be a specific coronavirus restriction.
53. The terms "closure requirement" and "coronavirus regulations" in this section have the same definitions as is set out in section 4.

Section 6: "The matter of relief from payment"

54. Subsection (1) sets out that the arbitrator will decide relief from payment with reference to two questions. Firstly, is there is any protected rent debt and secondly, if so, should the tenant be given any relief in respect of the payment of that debt and if so, what type of relief.
55. The definition of "relief from payment" in relation to a protected rent debt is set out in subsection (2). Relief from payment means any, or a combination, of the following:
    1. writing off the whole or part of the debt;
    2. giving additional time to pay the debt or allowing the debt to be paid in instalments – payment must be within 24 months (see section 14(7)); and
    3. reducing or cancelling the interest owed in relation to the debt.
56. This means that any relief from payment granted by the arbitrator will be in respect of the protected rent debt, and the debt will remain rent debt.