A number of cases featuring high-profile commercial tenants being ordered to pay arrears that had accrued during the pandemic seemed to deter commercial tenants from challenging payment of their arrears through the Courts.
However, the Commercial Rent (Coronavirus) Act 2022 (the Act) provided an alternative - a bespoke arbitration process in which "protected rent debts" (i.e. arrears which had fallen due during the pandemic and in the circumstances set out in the Act) could, for a limited period of time, be referred to an independent arbitrator for resolution. Some landlords and tenants did sign up to the scheme. We reported on several of the early decisions and others, in respect of cases which were referred to arbitration before the scheme closed to new applicants on 24 September 2022, continue to trickle through.
London Dockside Limited (In Administration) v Mayor and Burgesses of the London Borough of Newham [2023] involved a protected rent debt of somewhere between £3,320,300.65 (on the landlord's calculations) and £2,880,696.63 (on the tenant's calculations). The London hotel tenant also had post-July 2021 non-protected arrears of between £1m and £2m, which the arbitrator had no jurisdiction to consider, but which had a bearing on the tenant's overall financial status.
When the statutory moratorium on taking enforcement action against tenants came to an end on 31 March 2021, allowing the landlord to then sue for the non-protected arrears – which the tenant knew it would not be able to pay – the tenant went into administration, though continued to trade. This was relevant to the tenant's solvency; if the business was not 'viable' then the provisions of the Act would not apply. It also complicated matters as an administrator was dealing with the arbitration rather than the tenant itself. The local authority landlord also advanced arguments about its fiduciary duty to taxpayers as to the proper use of public money including the recovery of debts owed.
The Arbitrator made the following decisions:
- The protected period for the business (which determined the amount of the protected arrears), being a hotel, came to an end on 18 July 2021
- The protected arrears amounted to £3,320,300.65, including interest
- The non-protected arrears amounted to £1,628,235.79, including interest
- The business was viable, following a detailed analysis of the financial information provided and notwithstanding the administration, with the Arbitrator stating, "the tenant’s business has, or will in the foreseeable future have, the means and ability to meet its obligations and to continue trading".
- The tenant was required to pay £513,181 plus VAT (payable in 6 quarterly instalments from September 2023) towards the protected arrears, with the balance of those arrears written off.
This arbitration was a win for the tenant, given the relatively low amount it was ultimately ordered to pay when compared to the total protected arrears, which were substantial. However, the decision, running to 203 pages, involved a deep dive into the tenant's financial status. Any business which chose not to arbitrate due to the requirement to provide detailed financial information is likely to be glad of their decision.
