Commercial Rent (Coronavirus) Bill (Second sitting)

Mick Whitley Excerpts

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[The Chair]

Thank you. Mick Whitley.

[Mick Whitley (Birkenhead) (Lab)]

Good afternoon, panel. I think we met last week, didn’t we?

Andrew Goodacre: We did.

[Mick Whitley]

Q 44 Many businesses continue to experience significant covid-related disruption to their businesses, even following the end of the lockdown restrictions. Do you think that the protected period for rent debts should be extended, and if so, for how long?

Andrew Goodacre: The period we have is about right, actually. Part of the challenge is in scope of what is covered here. Some businesses that have been able to operate throughout the pandemic—essential businesses—but have been in the wrong location have suffered badly with trade. That is still ongoing. Even though businesses are open, if they are in a location near a travel hub or something, footfall will be considerably lower than they are used to—certainly pre-pandemic levels. There is an argument that those businesses are not being protected enough because of that.

[Mick Whitley]

Q Do other witnesses have anything to add?

Jack Shakespeare: Absolutely. I would echo that. The extension and the timescale seem about right; that is the message we are getting from our members. Each sector has its own characteristics. Our sector has a unique recovery curve, in that it is largely subscription focused. Recovery does not cover the cost of service straight away. That impacts recovery. The extended period of time is welcome. I am sure that we will come back to it today, but a guiding principle that needs to sit at the heart of this process is the message of sharing the burden. This is clearly a collective problem that needs a collective solution.

Martin McTague: I think it was about right when we first started discussing this, but omicron has changed all that. It is clear that we are now into a lot more uncertainty. It would be nice to have the flexibility to be able to move that date to respond to what seems to be an ever-changing virus.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Q Thank you for coming in to give evidence. Perhaps I could start with Mr McTague. On the 10 November cut-off date, we have had some evidence of concerns about landlords who have not engaged with their tenants, and who may have ignored the code and started to apply for court judgments to pay the full rental arrears. Those who started proceedings before 10 November could be in a more advantageous position than those who played it fair. Have you come across that at all through the FSB, and what is your view about whether there should be a retrospective change to the 10 November date?

Martin McTague: Around the beginning of November, most landlord-tenant arrangements—probably close to 90%—had settled, but the hard-core 10% had got into an acrimonious stand-off. We engaged with the Department for Business, Energy and Industrial Strategy to try to find a way in which those more acrimonious relationships could be dealt with. As for the cut-off date, I realise that it will leave some people on the wrong side of it, but I think that it was about right when it was chosen.

Andrew Goodacre: On the cut-off date, you have to choose a date. There is never a good time, from that point of view. It comes back to an understanding of what negotiations were taking place beforehand, and how they were being managed. Martin referred to a hard-core 10%—we are probably hearing about 15% to 20%. There is a hard core of people on both sides who seem unwilling to reach a negotiation. It would be good to include at the arbitration point an insight into what negotiations and actions were taking place beforehand, and whether those actions were reasonable in the circumstances.

The arbitrator has to decide how to resolve the debt issue. We have heard stories of landlords seeking side agreements or even being willing to write off a level of debt if the tenant gave up their secured tenancy. That kind of negotiation is going on as well. Is that fair? I do not know, because the security may be worth a lot more than half the rental debt, but it is not explained properly. If evidence of what was being said before the ninth can be put forward as part of the arbitration process, that may be a happy halfway house.

--- Later in debate ---

[Paul Scully]

Q Jack and Andrew, do you have any other reflections on the code?

Andrew Goodacre: This code is so much stronger than the previous code in 2020. We are moving in the right direction. It links into your earlier question about changing behaviours, and the code has been instrumental in that. On what would enhance the code, I appreciate that the information is not entirely available yet, but it is about who will be arbitrating, the costs of that arbitration and the decisions around the viability, so that people get to know as early as possible what they need to do to submit, if they feel that they will end up in that situation. Preparing for arbitration will be quite scary to some people—the mere thought of putting all that information together. As soon as we can release what they need to have recorded and prepared, the earlier they can start doing it. You do not want to try to collate all the information with two months to go on the process.

Jack Shakespeare: I have nothing to add to that.

[Mick Whitley]

Q Are you concerned that the potential costs of arbitration might put business tenants, especially small and independent businesses, off engaging in the arbitration process, thereby leading to their closure?

Martin McTague: It might do, but the alternative is that they would have to take legal action, which is likely to be much more expensive and protracted. It is not an ideal solution, but it is certainly a step in the right direction.

Andrew Goodacre: Yes, it could do. If you were looking at costs in the hundreds instead of the thousands that would obviously be better. You have to put it in context. As I think one of your colleagues said, next year an awful lot of cost increases are coming through to business, whether it is the national minimum wage or energy costs, which have tripled for many businesses. Suddenly, whether it is £1,000 or £2,000, it looks like a lot of money. That may lead to a better negotiation and solution before you get to arbitration, but it plays to the landlord to play the waiting game at that point in terms of initiating the arbitration. That is the threat of it.

Jack Shakespeare: To go back to one of Andrew’s last points, as much foresight and clarity on that up front would be beneficial, so that people can make informed decisions on how they go forward.

[The Chair]

Given that there are no further questions, I thank the witnesses for their evidence. That brings us to the end of today’s oral evidence session. The Committee will meet again on Thursday at 11.30 am in Committee Room 10 to begin line-by-line consideration of the Bill.

Ordered, That further consideration be now adjourned. —(Felicity Buchan.)