The ongoing effects of Brexit and the COVID-19 pandemic continue to create challenges for small businesses, contributing to a ‘perfect storm’ of commercial disputes.
With disputes costing small businesses up to £12 billion each year, it is vital for companies to prevent costs spiralling, through negotiations, mediation or expert resolution. Other measures bought in to combat the effects of the pandemic, such as online hearings, have also helped businesses to resolve disputes quickly and lower costs, and it is hoped that 2022 will see further measures taken to reduce to burden for businesses.
Speaking with North West Business Insider, Helena Davies discussed the potential impact of the Commercial Rent (Coronavirus) Bill, expected to pass through parliament on 25 March this year.
Explaining the background to the Bill, Helena said, “Right now there are billions of pounds worth of commercial rent arrears going on around the country – and it’s a massive problem. The Bill is going to introduce a compulsory arbitration scheme which is very unusual as it means people won’t go to court to get their rent arrears.
“The period when businesses were shut down is being ringfenced by the government and the arbitrator will look at a new series of tests in each case and could well write off all rent arrears, which is extraordinary.
“It’s both bizarre and interesting as well as retrospective, despite legally binding leases having been in place. If you were a tenant that did honourably pay, scraping around to do so, you could end up thinking ‘why did we do that?’. As an example, we deal with some charities who will be in this position.”
The Bill represents a significant shift in approach to property law. “As property lawyers we still use legislation which is hundreds of years old, whereas recently laws have been changing every few months. At present people are encouraged to try to reach an agreement rather than using dispute resolution because if all the rent arrears went to court, the court couldn’t cope.
“There’s no doubt that landlords’ hands have been tied, and that has led to a whopping problem, which is one of the reasons I’ve been interested in following a Bill’s progress through parliament for the first time in 20 years.
“The Bill is not through yet, but looking at the whole situation something had to be done. The idea is to preserve solvency and jobs, which has to be a good thing. However, it’s quite a hodgepodge of different types of dispute and resolution mechanisms, and I don’t think it’s been entirely thought through”.
You can read the full article in Business Insider magazine. You can read more about the Covid Commercial Rent Arrears Arbitration Scheme here. If you would like to discuss any issues relating to commercial rent arrears, please contact Helena Davies or a member of our Property Litigation Team.
