Commercial Rent (Coronavirus) Bill (HL Bill 116)

A

BILL

[AS AMENDED IN GRAND COMMITTEE]

TO

Make provision enabling relief from payment of certain rent debts under
business tenancies adversely affected by coronavirus to be available through
arbitration; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

Part 1 Introductory provisions

1 Overview

(1)This Act enables the matter of relief from payment of protected rent debts due
5from the tenant to the landlord under a business tenancy to be resolved by
arbitration (if not resolved by agreement).

(2)In this Act—

(a)sections 2 to 6 define for the purposes of this Act the terms “protected
rent debt”, “the matter of relief from payment” and other key terms
10used in this Act;

(b)Part 2 provides for statutory arbitration between the landlord and the
tenant under a business tenancy in relation to the matter of relief from
payment of a protected rent debt;

(c)Part 3 provides for temporary restrictions on the availability of certain
15remedies and insolvency arrangements that would otherwise be
available in relation to a protected rent debt.

(3)Nothing in this Act is to be taken as—

(a)affecting the capacity of the parties to a business tenancy to resolve by
agreement, at any time, the matter of relief from payment of a protected
20rent debt (or any other matter relating to the tenancy), or

Commercial Rent (Coronavirus) BillPage 2

(b)preventing an agreement resolving the matter of relief from payment of
a protected rent debt from having effect or being enforced.

2 “Rent” and “business tenancy”

(1)“Rent”, in relation to a business tenancy, means an amount consisting of one or
5more of the following—

(a)an amount payable by the tenant to the landlord under the tenancy for
possession and use of the premises comprised in the tenancy (whether
described as rent or otherwise);

(b)an amount payable by the tenant to the landlord under the tenancy as
10a service charge;

(c)interest on an unpaid amount within paragraph (a) or (b).

(2)In subsection (1)

(a)a reference to an amount includes any VAT chargeable on that amount;

(b)a reference to the landlord includes a person acting for the landlord
15(such as a managing agent);

(c)“service charge” means an amount—

(i)which is payable (directly or indirectly) for services, repairs,
maintenance, improvements, insurance costs or the landlord’s
management costs (including management costs of a superior
20landlord which the landlord is required to pay), and

(ii)which is a fixed amount or an amount that varies or may vary
according to the relevant costs (or a combination of the two).

(3)In subsection (2)(c)

(a)“insurance costs” includes costs incurred by the landlord in connection
25with insuring against loss of rent or in complying with obligations
under the tenancy either to insure the whole or any part of—

(i)the premises comprised in the tenancy, and

(ii)any common parts of a property which includes those premises,

or to pay the costs of such insurance incurred by any superior landlord,

(b)30“the relevant costs” means the costs or estimated costs incurred or to be
incurred by or on behalf of the landlord in connection with the matter
for which the service charge is payable and for this purpose—

(i)“costs” includes overheads, and

(ii)costs are relevant costs in relation to a service charge whether
35they are incurred, or to be incurred, in the period for which the
service charge is payable or in an earlier or later period.

(4)An amount drawn down by the landlord from a tenancy deposit to meet the
whole or part of a rent debt is to be treated as unpaid rent due from the tenant
to the landlord (and such rent is “paid” where the tenant makes good any
40shortfall in the deposit).

(5)“Business tenancy” means a tenancy to which Part 2 of the Landlord and
Tenant Act 1954 applies.

3 “Protected rent debt”

(1)A “protected rent debt” is a debt under a business tenancy consisting of unpaid
45protected rent.

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(2)Rent due under the tenancy is “protected rent” if—

(a)the tenancy was adversely affected by coronavirus (see section 4), and

(b)the rent is attributable to a period of occupation by the tenant for, or for
a period within, the protected period applying to the tenancy (see
5section 5).

(3)Rent consisting of interest on an unpaid amount within section 2(1)(a) or (b) is
to be regarded for the purposes of subsection (2)(b) as attributable to the same
period of occupation by the tenant as that unpaid amount.

(4)A period of occupation by the tenant that began, or ended, at a time during a
10particular day is to be treated as including the whole of that day.

(5)If any rent due under the tenancy is attributable to a period of occupation by
the tenant of which only part is of the description in subsection (2)(b), then so
much of the rent as can be reasonably attributed to that part of the period is
protected rent.

(6)15An amount treated by section 2(4) as unpaid rent is to be regarded as unpaid
protected rent if the rent debt that was satisfied (in whole or part) by drawing
it down from the tenancy deposit would otherwise have been a protected rent
debt.

4 “Adversely affected by coronavirus”

(1)20A business tenancy was “adversely affected by coronavirus” for the purposes
of section 3(2)(a) if, for any relevant period—

(a)the whole or part of the business carried on by the tenant at or from the
premises comprised in the tenancy, or

(b)the whole or part of those premises,

25was of a description subject to a closure requirement.

(2)For this purpose—

(a)“closure requirement”, means a requirement imposed by coronavirus
regulations which is expressed as an obligation—

(i)to close businesses, or parts of businesses, of a specified
30description, or

(ii)to close premises, or parts of premises, of a specified
description; and

(b)“relevant period” means a period beginning at or after 2 p.m. on 21
March 2020 and ending at or before—

(i)3511.55 p.m. on 18 July 2021, for business tenancies comprising
premises in England, or

(ii)6 a.m. on 7 August 2021, for business tenancies comprising
premises in Wales.

(3)A requirement expressed as an obligation to close businesses or premises of a
40specified description, or parts of businesses or premises of a specified
description, every day at particular times is to be regarded for the purposes of
subsection (2)(a) as a closure requirement.

(4)It is immaterial for the purposes of subsection (2)(a) that specific limited
activities were (as an exception) allowed by the regulations to be carried on
45despite the obligation to close (and accordingly the fact they were permitted or

Commercial Rent (Coronavirus) BillPage 4

carried on is to be disregarded in determining whether the tenancy was
adversely affected by coronavirus).

(5)Where the premises comprised in the tenancy were occupied by the tenant for
the purposes of a business not carried on solely at or from those premises, the
5reference in subsection (1)(a) to the business carried on at or from the premises
is to so much of the business as was carried on at or from the premises.

(6)In this section “coronavirus regulations” means regulations—

(a)made under section 45C of the Public Health (Control of Disease) Act
1984 (whether or not also made under any other power), and

(b)10expressed to be made in response to the threat to public health posed
by the incidence or spread of coronavirus.

5 “Protected period”

(1)The “protected period”, in relation to a business tenancy adversely affected by
coronavirus, is the period beginning with 21 March 2020 and ending with—

(a)15where the business tenancy comprises premises in England—

(i)if subsection (2) identifies a day earlier than 18 July 2021, that
day, or

(ii)in any other case, 18 July 2021,

(b)where the business tenancy comprises premises in Wales—

(i)20if subsection (2) identifies a day earlier than 7 August 2021, that
day, or

(ii)in any other case, 7 August 2021.

(2)The relevant day for the purposes of subsection (1)(a)(i) or (b)(i) is the last day
on which (or for part of which)—

(a)25the whole or part of the business carried on by the tenant at or from the
premises, or

(b)the whole or part of those premises,

was of a description subject to either a closure requirement or a specific
coronavirus restriction.

(3)30In subsection (2) “specific coronavirus restriction” means a restriction or
requirement (other than a closure requirement) imposed by coronavirus
regulations which regulated any aspect of—

(a)the way a business, or a part of a business, of any specified description
was to be carried on, or

(b)35the way any premises, or any part of premises, of a specified
description were or was to be used.

But for the purposes of subsection (3)

(a)requirements to display or provide information on premises (or parts
of premises), and

(b)40restrictions applying more generally than to specific descriptions of
businesses or premises (or parts of businesses or premises),

are not specific coronavirus restrictions.

(5)In this section “closure requirement” and “coronavirus regulations” have the
same meaning as in section 4.

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6 “The matter of relief from payment”

(1)References to the matter of relief from payment of a protected rent debt are to
all issues relating to the questions—

(a)whether there is a protected rent debt of any amount, and

(b)5if so, whether the tenant should be given relief from payment of that
debt and, if so, what relief.

(2)“Relief from payment”, in relation to a protected rent debt, means any one or
more of the following—

(a)writing off the whole or any part of the debt;

(b)10giving time to pay the whole or any part of the debt, including by
allowing the whole or any part of the debt to be paid by instalments;

(c)reducing (including to zero) any interest otherwise payable by the
tenant under the terms of the tenancy in relation to the whole or any
part of the debt.

15Part 2 Arbitration

Approved arbitration bodies

7 Approval of arbitration bodies

(1)The Secretary of State may approve one or more bodies to carry out the
20functions under section 8 (and a body which is for the time being so approved
is referred to in this Act as an “approved arbitration body”).

(2)The Secretary of State may only approve a body which the Secretary of State
considers to be suitable to carry out those functions.

(3)The Secretary of State may withdraw an approval given under subsection (1) if
25the Secretary of State considers that the body is no longer suitable to carry out
those functions.

(4)Where the Secretary of State proposes to withdraw an approval given under
subsection (1), the Secretary of State must notify the body in question and give
the body an opportunity to make representations.

(5)30Where an approval given under subsection (1) is withdrawn from a body, the
Secretary of State must make arrangements relating to—

(a)the repayment of any fees or expenses already paid to the body (if any),
and

(b)the body’s entitlement (if any) to fees or expenses.

(6)35The withdrawal of an approval given under subsection (1) does not affect the
validity of anything done by or in relation to the body in question before that
withdrawal.

(7)The Secretary of State must maintain and publish a list of approved arbitration
bodies.

8 40Functions of approved arbitration bodies

(1)An approved arbitration body has the following functions—

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(a)to maintain a list of arbitrators who—

(i)are available to act as arbitrators under this Part (whether alone
or as a member of a panel of arbitrators), and

(ii)appear to the body to be suitable, by virtue of their
5qualifications or experience, to act as such,

(b)to appoint an arbitrator or panel of arbitrators from that list to deal with
the matter of relief from payment of a protected rent debt referred to the
body for arbitration under this Part,

(c)where an arbitrator appointed by the body resigns, dies or otherwise
10ceases to hold office, to appoint another arbitrator from that list to fill
the vacancy,

(d)to set, collect and pay its fees and the fees of an arbitrator appointed by
it,

(e)to oversee any arbitration in relation to which it has appointed an
15arbitrator or panel of arbitrators, and

(f)to remove an arbitrator appointed by it from a case on any one of the
grounds in subsection (2).

(2)The grounds for removal are—

(a)that circumstances exist that give rise to justifiable doubts as to the
20impartiality or independence of the arbitrator;

(b)that the arbitrator does not possess the qualifications required for the
arbitration;

(c)that the arbitrator is physically or mentally incapable of conducting the
arbitration or there are justifiable doubts as to their capacity to do so; or

(d)25that the arbitrator has refused or failed to properly conduct the
arbitration, or to use all reasonable despatch in conducting the
proceedings or making an award, and that substantial injustice has
been or will be caused to the parties.

(3)An approved arbitration body must ensure that an arbitrator or panel of
30arbitrators appointed by it under subsection (1)(b) is independent from the
parties to the arbitration.

(4)Where an arbitrator resigns, dies or otherwise ceases to hold office, an
approved arbitration body must make arrangements relating to—

(a)the repayment of any fees or expenses already paid to the arbitrator (if
35any), and

(b)the arbitrator’s entitlement (if any) to fees or expenses.

(5)Where requested by, or as agreed with, the Secretary of State, an approved
arbitration body must provide a report to the Secretary of State containing
details of—

(a)40the exercise by the approved body of its functions under this section,
and

(b)any arbitrations overseen by the approved body under subsection
(1)(e), including the progress of, and any awards made in relation to,
such arbitrations.

(6)45An approved arbitration body must publish on its website the fees payable in
relation to arbitrations referred to it under this Part.

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References to arbitration by tenant or landlord

9 Period for making a reference to arbitration

(1)This section applies where the tenant and the landlord under a business
tenancy are not in agreement as to the resolution of the matter of relief from
5payment of a protected rent debt.

(2)A reference to arbitration may be made by either the tenant or the landlord
within the period of six months beginning with the day on which this Act is
passed.

(3)The Secretary of State may by regulations made by statutory instrument extend
10the period for the time being mentioned in subsection (2).

(4)A statutory instrument containing regulations under subsection (3) is subject
to annulment in pursuance of a resolution of either House of Parliament.

(5)In this Act “the period for making references to arbitration” is the period for the
time being mentioned in subsection (2).

10 15Requirements for making a reference to arbitration

(1)Before making a reference to arbitration—

(a)the tenant or landlord must notify the other party (“the respondent”) of
their intention to make a reference, and

(b)the respondent may, within 14 days of receipt of the notification under
20paragraph (a), submit a response.

(2)A reference to arbitration must not be made before—

(a)the end of the period of 14 days after the day on which the response
under subsection (1)(b) is received, or

(b)if no such response is received, the end of the period of 28 days
25beginning with the day on which the notification under subsection
(1)(a) is served.

(3)A reference to arbitration may not be made, an arbitrator may not be
appointed, and no formal proposal under section 11(2) or (4) may be made,
where the tenant that owes a protected rent debt is subject to one of the
30following—

(a)a company voluntary arrangement which relates to any protected rent
debt that has been approved under section 4 of the Insolvency Act 1986,

(b)an individual voluntary arrangement which relates to any protected
rent debt that has been approved under section 258 of that Act, or

(c)35a compromise or arrangement which relates to any protected rent debt
that has been sanctioned under section 899 or 901F of the Companies
Act 2006.

(4)A reference to arbitration must be made to an approved arbitration body.

(5)After a reference to arbitration has been made, an arbitrator may not be
40appointed, and no formal proposal under section 11(2) or (4) may be made,
during any period where the tenant that owes a protected rent debt is the
debtor under one of the following—

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(a)a company voluntary arrangement which relates to any protected rent
debt that has been proposed and is awaiting a decision under section 4
of the Insolvency Act 1986,

(b)an individual voluntary arrangement which relates to any protected
5rent debt that has been proposed and is awaiting a decision under
section 258 of that Act, or

(c)a compromise or arrangement which relates to any protected rent debt
that has been applied for and is awaiting a decision under section 899
or 901F of the Companies Act 2006.

(6)10This section, so far as relating to a company voluntary arrangement and a
compromise or arrangement under section 899 or 901F of the Companies Act
2006, applies to limited liability partnerships (as well as to companies).

Proposals for resolving the matter of relief from payment

11 Proposals for resolving the matter of relief from payment

(1)15A reference to arbitration must include a formal proposal for resolving the
matter of relief from payment of a protected rent debt.

(2)The other party to the arbitration may put forward a formal proposal in
response within the period of 14 days beginning with the day on which the
proposal under subsection (1) is received.

(3)20A formal proposal under subsection (1) or (2) must be accompanied by
supporting evidence.

(4)Each party may put forward a revised formal proposal within the period of 28
days beginning with the day on which the party gives a formal proposal to the
other party under subsection (1) or (2).

(5)25A revised formal proposal must be accompanied by any further supporting
evidence.

(6)The periods in subsection (2) and (4) may be extended—

(a)by agreement between the parties, or

(b)by the arbitrator where the arbitrator considers that it would be
30reasonable in all the circumstances.

(7)In this section “formal proposal” means a proposal which is—

(a)made on the assumption that the reference is not dismissed for a reason
set out in section 13(2) or (3),

(b)expressed to be made for the purposes of this section, and

(c)35given to the other party and the arbitrator.

12 Written statements

(1)This section applies to any written statement provided to the arbitrator by a
party (whether made by the party or another person) which relates to a matter
relevant to the arbitration.

(2)40The written statement must be verified by a statement of truth.

(3)The written statement may be disregarded by the arbitrator if it is not so
verified.

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Arbitration awards

13 Arbitration awards available

(1)This section sets out the awards open to the arbitrator on a reference under this
Part.

(2)5If the arbitrator determines that—

(a)the parties have by agreement resolved the matter of relief from
payment of a protected rent debt before the reference was made,

(b)the tenancy in question is not a business tenancy, or

(c)there is no protected rent debt,

10the arbitrator must make an award dismissing the reference.

(3)If, after assessing the viability of the tenant’s business, the arbitrator
determines that (at the time of the assessment) the business—

(a)is not viable, and

(b)would not be viable even if the tenant were to be given relief from
15payment of any kind,

the arbitrator must make an award dismissing the reference.

(4)Subsection (5) applies if, after making that assessment, the arbitrator
determines that (at the time of the assessment) the business—

(a)is viable, or

(b)20would become viable if the tenant were to be given relief from payment
of any kind.

(5)In that case the arbitrator must resolve the matter of relief from payment of a
protected rent debt by—

(a)considering whether the tenant should receive any relief from payment
25and, if so, what relief, and

(b)making an award in accordance with section 14.

14 Arbitrator’s award on the matter of relief from payment

(1)This section applies where the arbitrator is considering how to resolve the
matter of relief from payment of a protected rent debt as required by section
3013(5).

(2)Before determining what award to make the arbitrator must consider any final
proposal put forward to it by a party under section 11.

(3)Where both parties put forward final proposals under section 11

(a)if the arbitrator considers that both proposals are consistent with the
35principles in section 15, the arbitrator must make the award set out in
whichever of them the arbitrator considers to be the most consistent;

(b)if the arbitrator considers that one proposal is consistent with the
principles in section 15 but the other is not, the arbitrator must make the
award set out in the proposal that is consistent.

(4)40Where only the party making the reference to arbitration puts forward a final
proposal under section 11, the arbitrator must make the award set out in the
proposal if the arbitrator considers that the proposal is consistent with the
principles in section 15.