Government considers legislation to force landlords and tenants to seek arbitration in rental disputes

Tenants have accrued around £7bn in rent arrears since the pandemic struck but Government is seeking to avoid landlords from taking them to court as businesses seek to recover from the lockdowns.

The Government is considering legislation to force landlords and tenants to seek arbitration before going to court to settle disputes over rent arrears that have accrued during the Covid-19 lockdowns.

The Chief Secretary to the Treasury, Steve Barclay, is due to outline proposals to solve rental disputes on both commercial and residential properties to MPs in the House of Commons on Wednesday as part of a statement on the Government’s economic strategy during the extended lockdown until at least 19 July.

However, businesses hoping for further financial support from the Treasury following the delaying of the full opening up of the UK economy are set to be disappointed.

While hospitality, retail, entertainment and leisure companies have pleaded with the Government to extended support such as the furlough payments, business rates relief and VAT payment holidays, Mr Barclay is expected rule out any further extension to the schemes.

He is also expected to rule out any further extension to the eviction ban on tenants who have been unable to pay rent during the pandemic, despite many thousands of businesses being prevented from operating at full capacity due to the extended lockdown.

Instead, the Government is understood to be weighing up emergency legislation to offer tenant protection from immediate court action from landlords once the eviction ban is lifted at the end of this month.

As well as attempting to help both landlords and tenants ease into normal trading conditions, the Government is hoping an arbitration process will prevent the courts being clogged up with rent disputes.

Peter Bell, chief executive of the Commercial Tenants Association, said business would welcome any legislation as long as the arbitration was binding.

“There have been discussions around two forms of arbitration,” said Mr Bell. “One binding and one non-binding. Any arbitration has to be binding as otherwise landlords would still be permitted to take punitive action through the courts. We’re also looking for rent arrears to be ring fenced and payment plans put in place.

Businesses are facing a cliff edge right now. They can’t open up as normal on 1 July, 500,000 of them have VAT deferments to start paying, Covid loans to begin repayments on, business rates to pay, and there’s at least £7bn of rent arrears to on top of ongoing rent.”

However, Heather Powell, head of property and construction, at tax and advisory firm Blick Rothenberg, suggested landlords were also struggling.

“While many businesses simply can’t pay, there are some that have used the pandemic as a reason not to pay when they can afford to,” said Ms Powell. “An arbitration process seems like a sensible way forward and for those on both sides.”



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