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Published 11 April 2022
The Code of Practice is designed to support the 2022 Act to facilitate the resolution of commercial tenant arrears accrued over the Covid-19 lockdown periods in 2020 and 2021. This latest revised edition (published on 7 April 2022) replaces the old Code of Practice last updated in November 2021.
To understand where the 2022 Act and the latest Code of Practice fits in, it is helpful to recap the journey so far on pandemic-linked commercial rent debts:
The latest revised edition of the Code of Practice focuses on the final resolution of protected rent debts via the arbitration scheme. The key aims continue to be to help preserve viable tenant businesses who need support, while recognising that any relief should be no greater than necessary and tenants who can afford to do so should meet their lease obligations in full.
Details of the arbitration scheme itself are set out in the 2022 Act, however this is complemented by the Code of Practice which breaks the scheme down into three main stages:
Both parties are encouraged to reach agreement first without the need for intervention.
As part of this, there is a statutory 28 day pre-arbitration process that must be followed before an application can be made. This involves a letter of notification being issued, a 14 day response period and a further 14 days to respond with any counter proposals supported by relevant evidence (examples of which are found in Annex B).
If a resolution still hasn’t been reached, either party can then make an application for referral to arbitration, accompanied by their formal proposal for resolving the debt.
An example arbitration referral form can be found at Annex D, although the structure of the form itself will differ depending on the arbitration body being used.
In order for an arbitration referral to proceed, the arbitrator must be satisfied of the following:
What counts as viable is deliberately not defined to account for different business models in different sectors. Parameters for arbitrators to consider are set out in Annex E to the Code of Practice, which follows the more detailed working draft guidance the government separately published last month.
The Code of Practice also affirms two important points:
Provided the arbitrator is satisfied the arbitration can proceed, the respondent will have 14 days to submit a formal proposal in response to the application. Both parties can then submit further proposals or seek an extension. The arbitrator may also request further evidence.
If a hearing is not requested, the arbitrator must issue an award asap after the latest proposal is received (assuming no extension is granted). Or if no counter-proposals are submitted, the award must be issued asap following the 28th day after the application is made.
If a hearing is requested, it must be held within 14 days of receipt of a request and an award must then be issued within 14 days of the hearing (assuming no extension is granted).
The arbitrator’s award is final and binding and will either:
The following points from the revised Code of Practice are also worth noting:
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