Commercial Rent (Coronavirus) Bill

Lord Shipley Excerpts

2nd reading
Thursday 27th January 2022 Grand Committee

[Lord Shipley (LD)]

My Lords, I first remind the Committee that I am a vice-president of the Local Government Association—I do so because local authorities can have a substantial role as commercial landlords. I thank the Minister for his comprehensive introduction to the Bill and for his meeting yesterday with Peers who have an interest in the Bill to discuss its details. I like the opportunity afforded by this new system for debate; it is a most welcome change.

I welcome the Bill itself because it addresses the need to minimise bankruptcies of tenants and landlords. Many businesses have been kept afloat by reductions in their costs while closed during the pandemic, which have been important contributions by the Government to supporting those businesses. Many are viable businesses that simply need time to recover. However, as temporary protections for tenants are reduced, it is vital that the recovery of those businesses is not put in jeopardy by the actions of landlords. That said, landlords have not received £1 in every £6 that they should have over the last two years.

The Bill seems to balance the needs of landlords and tenants fairly. Binding arbitration clearly has very substantial support and seems the best way to proceed for businesses forced to close. A balance has been struck between the needs of landlords and the needs of tenants which should significantly reduce closures which are not in the interest of consumers or landlords. I am thinking here of the importance of the Bill to the retail sector and the high street, which needs all the support it can get. Empty shops just make the physical retail offer less attractive and will lead to even greater dependency on internet shopping.

I move to some specific questions on clauses that the Minister may be able to respond to today—if not, later in writing, if that helps. In Clause 2 there is mention of interest rates payable. My question relates to the levels of interest payable on unpaid rents and what controls the Government are planning, if any, on excessive rent charges. How are those to be prevented?

In Clause 9, there is a requirement to refer a dispute for arbitration within six months of the Bill passing—the Minister referred to this figure. Longer than six months may prove necessary, but I accept that the Government have built in a means of addressing that problem should it arise. In that context, does the Minister feel that there are enough arbitrators to meet the demand that is likely to be forthcoming? It is estimated that 7,500 businesses could need arbitration because there has been no resolution of the stand-off between the landlord and tenant directly. That is a large number; therefore, there is a question of capacity within the system as a whole.

On Clause 13, is the Minister satisfied that there are enough protections in place to ensure that an error is not made by an arbitrator on the viability of a business? I refer to alleged errors of judgment by arbitrators and whether they can be challenged by a tenant or whether they simply cannot be challenged at all, even with recourse to the law. I can foresee articles being printed in the press complaining about the actions of arbitrators where they are deemed to have made an unfair decision about the viability of a business. I recognise that these are difficult and sometimes complex issues, and there are issues of commercial confidentiality as well. Nevertheless, I would welcome the Minister’s assurance that in the defining of viability by an arbitrator, the rights of the tenant are protected.

Clause 14 requires rent debt to be paid within 24 months of a decision. I am not sure that that is long enough. It may be in most cases, but it may not be enough for a business which is viable but on the margins and which would benefit from a longer time period. How fixed is that 24 months in Clause 14?

I say in passing that I welcome Clause 27, which will enable the Secretary of State to apply the provisions of the Bill to business tenants forced to close by future coronavirus restrictions. It is wise that the Government are proposing to use the affirmative procedure. Clause 27 is very important.

I have two further issues, as I draw to a close. The first relates to case law, because there is going to be a great deal of new case law. The Minister referred to transparency in the operation of the Bill, and I welcome that intention. I am not quite clear how, with all the new case law that is established by all the binding arbitration, there will be a system in place to ensure that binding decision-making reflects that body of case law. Is it the Government’s assumption that there will not be any new case law? With 7,500 cases all being heard over a comparatively short period, how are we going to ensure that a decision made in one place by an arbitrator is actually similar to a decision made somewhere else by a different arbitrator?

These are imperfect systems—I fully understand that —but nevertheless I am not quite clear on the extent to which decisions and the reasons for them can be shared publicly for other arbitrators or the general public as a whole to see. I recognise that there are issues around commercial confidentiality, but are the Government satisfied that enough is going to be published about the reasons for decision for awards that are being made?

Can I just double-check the issue of fee levels with the Minister? This Bill is about businesses on the brink. Fee levels for binding arbitration will be important for a tenant. I hope that the Government have in place means of ensuring that fee levels will not be excessive.

The Minister has explained the context. The Government have taken a whole set of temporary measures to support businesses over the last two years, which I have welcomed, but the problems that we now face are, first, with the business rates system, worth £25 billion a year to the Treasury. It is expensive, and I read in the press that there is a stand-off between the Department for Levelling Up and the Treasury about whether retail premises on high streets in particular should, for a period at least, pay no business rates.

There is a huge problem then for local government, because income from business rates really matters. We do not have the right level of discussion about some of those big strategic issues, and I am not sure that it is something that can be dealt with by only one political party. That said, there is a business rate context; for many businesses on the brink, business rates really matter, but they are also facing rises in general inflation and rising energy costs. What this Bill does can actually help mitigate some of the cost pressures that viable businesses currently face.

I welcome this Bill, which is a huge step forward. The Government have protected themselves by enabling themselves, through the negative or affirmative procedure, to make changes to it—but I welcome it, and I commend what the Government are attempting to do.