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Commercial Rent (Coronavirus) Act 2022

Contents

Part 4: Final Provisions

Section 28: Power to apply Act in relation to future periods of coronavirus control

  1. This section gives a power to the Secretary of State to make regulations to re-apply this Act in the future in the case of business tenancies adversely affected by closure requirements in relation to coronavirus.
  2. Under subsection (2) regulations to re-apply the Act may be made in respect of either English or Welsh business tenancies, or both.
  3. Subsection (3) sets out the test for a business tenancy to be adversely affected by a closure requirement for the purposes of subsection (1). This enables the power to be used in respect of closure requirements that were imposed after the protected period set out in the Act, but before the Act came into force.
  4. Subsection (4) sets out what a "closure requirement" means in this section.
  5. Subsection (5) sets out the meaning of "coronavirus" under the Act.
  6. Subsection (6) makes it clear that the power can be used in respect of closure requirements which may not have ended when regulations are made.
  7. Subsection (8) provides that any regulations made under this section may:
    1. provide for provisions to apply with necessary modifications, as set out in the regulations;
    2. make different provisions for England and Wales;
    3. make incidental, supplemental, consequential, saving or transitional provisions.
  8. Subsection (9) defines the meaning of "modifications" and limits the power to modify the Act to those changes that are necessary to make the Act work in the specific circumstances.
  9. Subsection (10) requires the power to be exercised with the consent of Welsh Ministers so far as it relates to the re-application, in respect of Welsh business tenancies, of the moratorium provisions in Schedule 2 (excluding paragraph 3(6) and (7)), section 23 so far as it relates to Schedule 2 (excluding paragraph 3(6) and (7)) and Parts 1 and 4, so far as they relate to these provisions.
  10. Subsection (11) sets out that the regulations are to be made by statutory instrument and are subject to the affirmative resolution procedure.

Section 29: Concurrent power for Welsh Ministers to apply moratorium provisions again

  1. This section provides that Welsh Ministers can use the power in section 28, concurrently with the Secretary of State, so far as it relates to the re-application, in relation to Welsh business tenancies, of Schedule 2 (excluding paragraph 3(6) and (7)), section 23 so far as it relates to Schedule 2 (excluding paragraph 3(6) and (7) and Parts 1 and 4, so far as they relate to these provisions.
  2. Subsection (2) sets out various consequential amendments.
  3. Subsection (3) adds the Act to the list of enactments at paragraph 11(6)(b) of Schedule 7B of the Government of Wales Act 2006. Restrictions in Schedule 7B prevent the Senedd from removing a Minister of the Crown function that is exercised concurrently or jointly with a Minister of the Crown without the consent of the UK Government. This allows the Senedd to alter the concurrent arrangements without needing the UK Government’s agreement.

Section 30: Crown application

  1. This section provides that the Act binds the Crown.

Section 31: Extent, commencement and short title

  1. This section sets the territorial extent of the Act; that is the jurisdictions for which the Act forms part of the law.
  2. The table in Annex A sets out a summary of the position regarding territorial extent and application in the United Kingdom.
  3. Parts 1 to 3 of the Act extend to England and Wales only (except as provided in subsections (2) and (3)).
  4. Part 4 of the Act extends to the whole of the United Kingdom.
  5. The provisions of section 25 relating to restructuring under the Companies Act 2006 extend to the whole of the United Kingdom, and those relating to company voluntary arrangements extend to England and Wales and Scotland only. Paragraph 1 of Schedule 3 and section 27 (as far as it relates to that paragraph), which relate to winding up, extend to England and Wales and Scotland only. This is to reflect the extent of the relevant provisions of the Companies Act 2006 and Insolvency Act 1986 respectively, so that the measures are unavailable in respect of protected rent debt as intended. Part 1 extends to Scotland and Northern Ireland, in so far as relevant to the above provisions that extend to each of these jurisdictions.
  6. This section also provides for this Act to come into force on the day it is passed, except for the provisions on winding up in paragraph 1 of Schedule 3 and section 27 (so far as it relates to that paragraph). These aspects of the Act come into force on 1 April 2022, once the existing moratorium ends on 31 March 2022.

Schedule 1: Modification of the Arbitration Act 1996 in relation to arbitrations under this Act

  1. This Schedule makes modifications to provisions in the Arbitration Act 1996 as it would apply to arbitration under Part 2 of this Act.
  2. Paragraph 1 provides a list of sections, subsections or wording of the Arbitration Act 1996 which should be treated as though omitted when applying to arbitration under Part 2 of the Act.
  3. Paragraph 2 inserts and substitutes wording in specified provisions of the Arbitration Act 1996, so as to modify their effect with regards to arbitrations made under Part 2 of this Act.
  4. Paragraph 3 makes clear that the modifications made under paragraphs 1 and 2 of this Schedule do not affect the operation of sections 94 to 98 of the Arbitration Act 1996 in relation to other provisions of this Act.

Schedule 2: Temporary moratorium on enforcement of protected rent debts

Preliminary: interpretation

  1. Paragraph 1(1) sets out that this Schedule applies to protected rent debt under a business tenancy.
  2. Sub-paragraph (2) provides the definitions for terms used in this Schedule.

Making a debt claim

  1. Paragraph 2(1) prevents a landlord from making a debt claim for protected rent debt, during the moratorium period.
  2. Sub-paragraph (2) sets out that "debt claim" for this purpose means a claim to enforce a debt in civil proceedings.

Debt claims made before the day on which this Act is passed

  1. The use of "arbitration" in this section means arbitration provided for by Part 2 of the Act.
  2. Paragraph 3 applies to debt claims relating entirely or partly to protected rent debt which were made on or after 10 November 2021, but before the day on which this Act was passed.
  3. Sub-paragraph (2) states that either the landlord or the tenant can apply for the proceedings on the debt claim to be stayed, so that the payment of the protected rent debt can be resolved through other means. This includes, but is not limited to, arbitration under this Act. Sub-paragraph (3) means that if such an application is made, the court must stay the proceedings.
  4. If a judgement is made in favour of the landlord during the period set out in paragraph 3(1), then if the judgement debt remains unpaid, the debt (so far as it relates to protected rent debt) can be resolved through arbitration under Part 2 of this Act, or otherwise by negotiation, and the judgement debt may not be enforced until the end of the moratorium period. If relief from payment of a protected rent debt is awarded through arbitration, or otherwise agreed, the effect of the judgement debt is to be altered in line with the award or agreement.
  5. If the judgement is registered under section 98 of the Courts Act 2003 and relates to protected rent only, then it must be cancelled once the moratorium period has ended, if the court is made aware that relief from payment has been granted.
  6. "Debt claim" used in this paragraph has the same meaning as it does in paragraph 2.
  7. "Tenant" is defined to include guarantors, anyone else who is liable on an indemnity basis for payment of rent under a business tenancy, and former tenants who are liable for the payment of rent under a business tenancy. The effect of this is that paragraph 3’s provisions on debt claims issued between 10 November 2021 and the Act’s commencement, apply to claims against tenants; and also against guarantors, including where an indemnity has been provided, and former tenants whether they remain liable under an authorised guarantee agreement or due to privity of contract.

Using CRAR (the commercial rent arrears recovery power)

  1. Paragraph 4(1) sets out that a landlord must not use CRAR in relation to a protected rent debt during the moratorium period.
  2. Sub-paragraph (2) gives further details on what cannot be done with regards to CRAR within the moratorium period for the protected rent debt. The landlord cannot authorise an enforcement agent to act for them, and neither can an agent give an enforcement notice.
  3. Sub-paragraph (3) explains that "CRAR" and "notice of enforcement" have the same meaning as they do in the Tribunals, Courts and Enforcement Act 2007 which contains the CRAR process.
  4. Sub-paragraph (4) inserts new wording into that Act to signpost there that CRAR may not be exercisable to recover certain debt, due to the provisions in this paragraph of this Act.

Enforcing a right of re-entry or forfeiture

  1. Paragraph 5(1) provides that a landlord is prevented from enforcing a right under the tenancy to forfeit for non-payment of the protected rent during the moratorium period.
  2. Sub-paragraph (2) protects the landlord from being considered to have waived the right to forfeit unless they do so expressly in writing, during the moratorium period. The landlord is also protected from being taken to have waived the right to forfeit prior to the Act being passed, by section 82(2) Coronavirus Act 2020.
  3. Section 30 of the Landlord and Tenant Act 1954 sets out grounds on which a landlord can oppose an application for a new lease under Part 2 of that Act. One of the grounds is persistent delay in paying rent (section 30(1)(b)). Sub-paragraph (3) provides that non-payment of protected rent before the moratorium period has ended, is to be disregarded for purposes of section 30(1)(b) of that Act.
  4. Paragraph 6 provides that if a tenant applies for relief from forfeiture as a sub-tenant under a superior lease, the court, when determining whether to grant relief from forfeiture and the terms of relief, must disregard any failure of the tenant to pay protected rent.

Using a landlord’s right to appropriate rent

  1. Paragraph 7 applies in relation to rent being paid during the moratorium period at a time when the tenant owes the landlord an unprotected rent debt as well as a protected rent debt, and the tenant has not exercised their right to use the payment to pay any particular rent debt owed to the landlord.
  2. Sub-paragraph (2) states that, in this case, the landlord must appropriate the payment to meet the unprotected rent debt before it can be used to meet the protected rent debt.
  3. Sub-paragraph (3) provides the definition of "unprotected rent debt".
  4. Paragraph 8 applies in relation to rent paid during the period set out in sub-paragraph (2), at a time when the tenant owes the landlord an unprotected rent debt as well as a protected rent debt, and the tenant has not exercised their right to use the payment to pay any particular rent debt owed to the landlord.
  5. The time period referred to begins with the day after the last day of the protected period for the debt and ends the day before the moratorium period starts.
  6. Sub-paragraph (3) states that, in this case, during the moratorium period, the landlord must appropriate the payment to meet the unprotected rent debt before it can be used to meet the protected rent debt.
  7. If a landlord used their right to appropriate rent debt during the period set out in sub-paragraph (2), sub-paragraph (4) states that the appropriation does not have the effect of allowing protected rent to be treated as paid first, and the payment should be treated as having been used for the unprotected rent debt first.
  8. Sub-paragraph (5) explains that "unprotected rent debt" has the same meaning as it does in paragraph 7.

Using a tenant’s deposit to apply towards unpaid rent debt

  1. Paragraph 9 applies in cases where a tenancy deposit is available to the landlord for the purpose of recovering rent debt.
  2. Sub-paragraph (2) means that the landlord cannot recover any protected rent debt from a tenancy deposit during the moratorium period.
  3. Sub-paragraph (3) states that in cases where a landlord has already used a tenancy deposit to recover protected rent debt before the beginning of the moratorium period, the tenant is not required to top up the deposit to address any shortfall before the end of that period.

Schedule 3: Winding-up and Bankruptcy Petitions

Prohibition on presenting a winding-up petition solely in relation to a protected rent debt

  1. Paragraph 1 applies in relation to a protected rent debt owed by a tenant which is a company.
  2. Sub-paragraph (2) provides that a landlord cannot present a winding-up petition on grounds that the company is unable to pay its debts during the moratorium period. A landlord is still able to present a winding-up petition if they are owed a debt which is not protected rent debt, as defined in this Act.
  3. Sub-paragraph (3) gives the definitions of "moratorium period", "registered company", and "unregistered company" for the purposes of this paragraph.
  4. Paragraph 1 applies to limited liability partnerships as it does to registered companies.

Prohibition on presenting a bankruptcy order petition in relation to a protected rent debt

  1. Paragraph 2 puts in place a restriction on landlords from petitioning for bankruptcy against a tenant such as a sole trader relating to protected rent and commenced during the relevant period.
  2. Paragraphs 2 and 3 apply when a protected rent debt is owed by an individual.
  3. In order to be able to petition for bankruptcy, a creditor must show that the debtor is unable to pay or has no reasonable prospects of being able to pay their debt. To show this, the creditor must either serve a statutory demand or there must be a judgment or order of a court in favour of the petitioning creditor in respect of the debt. Sub-paragraph (2) prevents a petition being presented relying on a statutory demand by a landlord made during the relevant period in respect of a protected rent debt. Sub-paragraph (3) prevents a petition being presented in relation to any protected rent if the claim for the debt was issued during the relevant period.
  4. Until these provisions came into force, petitions could continue to be presented based on statutory demands and claims which would not be valid once the provisions were in force. If such a petition is presented, the court may make an order to restore the position to what it would have been had the petition not been presented.
  5. Once a petition is presented an interim receiver or a special manager may be appointed by the court. Sub-paragraph (5) provides that if it appears to the interim receiver or the special manager that the petition is one described in sub-paragraph (2) or (3), they must refer the matter to the court to determine whether the court should give an order to restore the position to what it would have been had the petition not been presented.
  6. The interim receiver and special manager may be permitted by the court to do certain things with the debtor’s estate. Sub-paragraph (6) provides that they are not liable in civil or criminal proceedings for anything done pursuant to such a court order.
  7. Sub-paragraph (7) provides the definition of "relevant period" for the purposes of paragraph 2 as beginning on 10 November and ending on the day when arbitration is concluded.
  8. Sub-paragraph (8) defines "claim" for the purpose of this paragraph.
  9. Sub-paragraph (9) provides that this paragraph is to be treated as though it came into force on 10 November 2021.

Orders for bankruptcy orders made before the day on which this Act is passed

  1. Paragraph 3 applies when a court makes a bankruptcy order against a tenant following a petition from a landlord, and the order is made after 10 November but before this Schedule came into force. This is only for cases where the order is one that would not have been made had the Schedule been in force, i.e., one that would be affected by the provisions under paragraph 2.
  2. Sub-paragraphs (2) and (3) state that in this case, the order is considered void and neither the official receiver, the trustee in bankruptcy, interim receiver or special manager are liable for any actions taken in respect of the order.
  3. Sub-paragraph (4) means that a court may instruct that action is taken to restore the tenant to position that it would have been before the petition for a bankruptcy order was made. This allows the court to undo any negative effects of the bankruptcy order and may lead to the petitioner (landlord) becoming liable for the costs of doing so.
  4. Sub-paragraph (5) requires the official receiver, trustee, interim receiver or special manager to refer the matter to the court if it appears that an order is void (as under sub-paragraph (2)) and that the court should give directions (as under sub-paragraph (4)), to determine whether the court should give such directions.

Interpretation

  1. Paragraph 4 provides definitions of terms used throughout this Schedule. References to the "tenant" in Schedule 3 include guarantors, anyone else who is liable on an indemnity basis for payment of rent under a business tenancy, and former tenants who are liable for the payment of rent under a business tenancy. The effect of this is that Schedule 3’s provisions on winding up and bankruptcy apply to petitions and orders against tenants; and also, where such persons are liable for protected rent debt, against guarantors, including where an indemnity has been provided, and former tenants whether they remain liable under an authorised guarantee agreement or due to privity of contract.

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