Commercial Rent (Coronavirus) Bill

Ruth Cadbury Excerpts

2nd reading
Wednesday 24th November 2021 Commons Chamber

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I thank the Minister for his speech and for introducing the Bill. Let me reassure the House that I hope to make a slightly more cohesive speech then the Prime Minister managed on Monday when he spoke to the CBI about the Government’s approach to business, but Members are welcome to intervene if I do start making car noises or talking about Peppa Pig.

We generally welcome the Bill, and it will be welcomed by retail businesses up and down the country, because it creates an arbitration process for disputes between landlords and commercial tenants on rent arrears caused by enforced closure during the lockdowns, and also the subsequent impact on businesses’ income and their ability to meet their outstanding rent demands, including outstanding service charges. It also restricts enforcement action for the recovery of rent arrears debt through the county courts for six months.

We accept the need for a fair arbitration process that deals with commercial rent arrears, and the need to ensure that that process works. There are some aspects on which we will seek further information, but before I come to them, I want to address the context in which this short and specific Bill is being introduced. Until this morning, we understood that it was to be a joint Bill between two Departments. It will not surprise the House to know that, as a shadow Levelling Up, Communities and Housing Minister, I shall be responding to the Minister as though he were the Communities Minister, because there are a number of aspects of communities and levelling up that I wish to address.

[Janet Daby (Lewisham East) (Lab)]

My Lewisham East constituency has among the largest number of small businesses in London. Brilliant councils such as mine, the Borough of Lewisham, can only go so far in supporting small businesses, especially when their budget has been cut by the huge amount of 63% since 2010. What businesses across our country really need is the Government to see them through this very difficult ongoing period, and they need a recovery plan in place.

[Ruth Cadbury]

My hon. Friend is absolutely right. This Bill is specific and closely drawn and, as I will go on to say, there are a lot of other challenges still outstanding for businesses and the communities in which they sit that the Government need to be working on as well.

We of course recognise how tough the last 20 months have been for so many businesses and the pain of the pandemic has impacted across the economy, but it has been particularly hard on small businesses, especially family-owned businesses which are anchored in their communities—businesses that have spent years, even decades, doing the right thing such as supporting their staff and investing in their skills, and putting back into the local area. There are countless examples of businesses who have always done the right thing, and who saw a downturn after they followed public health regulations and they closed.

I of course acknowledge the support that the Government provided for businesses during the pandemic —bounce back loans, VAT deferrals, rates relief, the furlough scheme, and the rents-based schemes—but too many businesses missed out on many of these schemes: those refused loans because their bank was not on the Government-approved list; or supply-chain businesses to sectors such as hospitality whose customers were required to close but they were not. They missed out.

Despite the relief schemes, many are still struggling; loans and VAT deferrals still have to be repaid, and those not yet making a profit are still required to pay their bounce back loan. Labour has sought to amend the rules so that a business has to repay its loan only when it is making money. The pain has been particularly hard on small independent businesses and family-owned businesses, which are anchored in their communities, and many sectors—such as the arts and events, and, particularly in the constituency of my hon. Friend the Member for Feltham and Heston (Seema Malhotra), travel and tourism—still face great uncertainty for months and years ahead.

On businesses that could not cope and had to close, in too many areas there are now vacant windows; there is no demand to take on the vacant premises. Of course the pandemic is not solely to blame for retail premises remaining vacant for long; the change in our shopping habits towards more online and less in-person has a major part to play, and in areas where a large proportion of people are impacted by the triple whammy of rising costs of living, the cuts to universal credit and the permanent or temporary loss of jobs, it is no wonder that retail businesses are particularly struggling when too many people have not enough money left over in their pockets at the end of the month.

The commercial rent arrears built up for businesses that had to close during the lockdowns are only one part of the challenge facing businesses across the country, so although we welcome the Government’s taking action through this Bill, there is still so much more that they could do. For a start, they must address our outdated business rates system, under which similar sized shops pay vastly different rates and revaluations.

[Mr Perkins]

I am grateful to my hon. Friend for talking about the fact that although we support the Bill in its narrow terms, it could have offered much more, and particularly grateful for her making the point about business rates. I remember being in the shadow business Department team back in 2014, and the Government were promising to change the business rates system back then. We have had any number of talks about it since, and so many businesses on the high streets know how unfair the regime is, yet we still have not had that action. Does my hon. Friend welcome the announcement of my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) that a future Labour Government will address this unfairness?

[Ruth Cadbury]

My hon. Friend anticipates what I am about to say: this is about not just similar sized shops paying vastly different rents, but revaluations that result in exorbitant rises—by 200% for a business in Brentford in my constituency. Yet again the Chancellor has kicked the can down the road on business rates reform, as his predecessors have done before him. Businesses cannot afford the further dither and delay that we keep seeing from this Government, and of course I welcome the announcement by my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) and my hon. Friend the Member for Leeds West (Rachel Reeves) that Labour will abolish the outdated business rates system and replace it with a fairer system that creates a more level playing field and breathes life into our high streets.

Then there is the Chancellor’s latest tax hike, a 1.25% increase in national insurance contributions, a double-whammy attack on our businesses; just when they need support, this Government decide it is time for a tax hike.

Then there is the permitted development rights changes and the impact that they will have, and in some cases already have had, on our town and village centres. The geographical hearts of our communities are threatened, particularly with the most recent changes brought in on 1 August that will make it easier for high street shops and businesses to be converted into poor-quality slum housing, with local communities and councils powerless to stop it.

I will finish by touching on a few areas where we would want to ensure further scrutiny of this proposed legislation as it moves forward. First, on the levels of arbitration fees, we know how tough things have been for businesses and want to ensure that they are not pushed over the edge with excessive fees in the new system. Secondly, as has been mentioned, there is the question of the viability of businesses and how they are assessed. Many businesses, especially those reliant on international travel and in other sectors that have been impacted in the long term by coronavirus, are still facing business slowdown even today. So I hope the Government will put in place a fair and reasonable assessment of viability, ensuring no business that can survive is left behind.

Thirdly, there is the issue of transparency and consistency in the arbitration and appeals process and how we can ensure a fair balance in the system between landlords and tenants. Finally, we seek assurance on whether a brand new, fully operational arbitration process can be in place by March next year. These are all areas that need more scrutiny and where the Opposition will make sure the Bill as it progresses works for businesses up and down the country.

To conclude, I reaffirm that we welcome the Bill and the arbitration process it creates for businesses who were in rent arrears through the pandemic closures, but the Government must not see this as the only action they still need to take: businesses up and down the country have had such a difficult 20 months that they need a Government prepared to do more to support them.

Commercial Rent (Coronavirus) Bill (First sitting)

Ruth Cadbury Excerpts

Committee stage
Tuesday 7th December 2021 Public Bill Committees

[Paul Scully]

Fantastic. Thank you very much.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

Q We have had evidence of concerns about the arbitration scheme—for example, whether there should be a single approved arbitration body and about the difference compared with other arbitration schemes in how the agreement is reached as to which arbitrator should be used. There is a concern that they should be legally qualified rather than just businesspeople, because of the nature of complex arbitration processes. There is also a question about confidentiality, which is the norm in such processes but is not specified in the Bill. Mr Curran, do you have any comments on those issues?

Dominic Curran: On the arbitrators who will be used, the Bill says, if I remember it correctly, that the Secretary of State will nominate or choose which arbitrating bodies will be eligible to provide arbitrators to the process, so it remains a bit of an open question. All I would say—having spoken to officials, this point is well understood and well heard—is that given the nature of the discussions that inevitably will be had during the arbitration process, we would prefer to see arbitrators who have a strong accountancy background, perhaps more so, or at least as much as, those who have a property conflict resolution background.

The nature of the process is to look at tenants’ accounts and to make sure that their income, liabilities and forecasts for turnover are such that they can pay a relevant and viable proportion of their rent arrears. So rather than it being a dispute over the interpretation of a lease or the duties of a tenant or a landlord, it should really be about understanding the finances of that business and enabling it to pay a proportion of rent between 0% and 100%, while being able to continue to trade viably at the same time. We certainly want to see the accountancy profession well represented in that.

Whether any other trade bodies, beyond those that represent accountants, are given the right to carry out the process by the Secretary of State remains to be seen. If you wanted to get the confidence of businesses that are tenants, however, you would want to make sure that you had accountants rather than property dispute arbitrators fulfilling the duty.

[Ruth Cadbury]

Q Is there anything else to add about the arbitration processes in the Bill?

Dominic Curran: No, I think it is a reasonable set of stages. There is a helpful flowchart in the revised code. The only point I would make is that we have a situation where the arrears, at least in retail, are historical in that they go up only to April 12 or the end of March, given rent payment dates. We want the legislation to be passed as quickly as possible, the arbitrators to be announced as quickly as possible and the process to start sooner rather than later, because it is the uncertainty that is particularly damaging for any business.

Kate Nicholls: I agree with Dominic that the key thing is that we need to have confidence from both parties to be able to and want to use the process to resolve these outstanding matters as rapidly as possible. I am therefore more attracted to using a multiple variety of arbitration bodies, rather than just one, because we need to make sure that there is no delay in appointing arbitrators and their being able to take on the work. I also agree with Dominic that it is hugely important that they have broad-based financial and business understanding and sector-specific—in our case—understanding of the businesses.

This is not necessarily a legal issue or a dispute resolution issue. This is a financial issue that centres on viability and affordability, and therefore an understanding of the nature of the business, the way it operates, the cost of business and the costs coming down the line, as Dominic alluded to, is critical to an understanding of affordability and ability to pay. Those are the key elements that we want to see. Confidentiality, given that you are effectively opening books and sharing financial information, is really important because tenants clearly need confidence that that will be protected. However, I do not see any problems with the Bill as it is currently drafted.

[Sara Britcliffe (Hyndburn) (Con)]

Q Ms Nicholls, you touched on templates earlier. What more can we do to make sure that commercial tenants are aware of the arbitration process available to them?

Kate Nicholls: As soon as we have got the legislation through, we need the communication out there as rapidly as possible that this is coming, so that the scope of the Bill, as it goes through the House, is clearly understood. We are doing a wide range of outreach through the trade press and through our own communication channels to cascade that information out, not only through the trade association but more broadly. We are working closely with BEIS and MHCLG to make sure that that communication goes out there.

I think it is then about making sure that we have a communications plan post the Bill being enacted to ensure that there is confidence in the arbitration process and the arbitrators, and that we encourage people to use it. It will then be down to the industry to make this work. We will work flat out to do that, and to facilitate the tools that people need to enter into confidential negotiations, using the code of practice, and then arbitration if they absolutely need to as a last resort. Arbitration should be a matter of last resort in this case. Success for the Bill and the trade associations helping commercial tenants through this will be if a small number of cases actually need to go to arbitration to be resolved.

Commercial Rent (Coronavirus) Bill (Third sitting)

Ruth Cadbury Excerpts

Committee stage
Thursday 9th December 2021 Public Bill Committees

[Paul Scully]

The arbitration scheme will be delivered by independent arbitration bodies. The clause gives the Secretary of State the power to approve arbitration bodies for that purpose. Arbitration bodies will have to demonstrate that they are suitable before being approved. Further information on what constitutes “suitable” and how to become an approved body will be published on gov.uk.

The Secretary of State can also withdraw approval status if the body is no longer suitable to deliver arbitration services. The Secretary of State must notify the body if that is the case, and the body will have an opportunity to make representations. Under the clause, a list of approved arbitration bodies must be maintained and published by the Secretary of State, enabling parties to a dispute to know to whom an application for an arbitration may be made. The clause is therefore crucial to enable a high-quality, independent and accessible service to be delivered to landlords and tenants.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

It is a pleasure to serve under your chairship, Mrs Murray. When the Government create a dispute resolution process, as the Bill does, it goes without saying that there needs to be arbitration bodies. We naturally support the clause—although we have a couple of amendments coming up—as it is inevitable and clear. However, I want to address a point in subsection (7), which states:

“The Secretary of State must maintain and publish a list of approved arbitration bodies.”

We hope that the list will be easily discoverable and regularly updated. On subsection (6), we hope that the Government will ensure that the process of removing arbitration bodies that are not up to scratch is done transparently and speedily. It is absolutely essential that both parties to arbitration—landlords and businesses—have confidence, that the process is fair, and that arbitrators are trusted and appropriately experienced. Although we seek Government reassurance on that, we will support clause 7.

--- Later in debate ---

[The Chair]

I call Ruth Cadbury to speak to amendment 1.

[Ruth Cadbury]

I rise to speak to the amendment, which seeks to clarify the definition of “debt claims”, including claims against guarantors. Currently, “debt claim” has the same meaning as in paragraph (2) of schedule 2, and “tenant” includes a person who guarantees the obligations of the tenant under a business tenancy.

The purpose of the amendment is to provide extra clarity on whether the protections given against county court action are also given to the guarantors of tenancies. We do not want to create a back door by which tenants are protected from enforcement but the guarantors are still liable. It is crucial that the Government ensure that guarantors of tenants are also protected against debt claims during the prescribed six-month period. We do not want a common-sense measure to be circumvented by landlords going after guarantors with no limit.

[The Chair]

We are discussing amendment 1 to clause 8, as on the amendment paper—

[Ruth Cadbury]

I was speaking to the wrong amendment, Mrs Murray. I apologise to Committee members and staff.

I beg to move amendment 1, in clause 8, page 6, line 25, at end insert—

“(2A) The Secretary of State must by regulation specify the meaning of ‘qualifications’ and ‘experience’ for the purpose of this section.”

This amendment would require the Secretary of State to specify by regulation to meaning of qualifications and experience in section 8.

Amendment 1 would require the Secretary of State to specify by regulation the meaning of “qualifications” and “experience”. A fair arbitration process is crucial for businesses, landlords and all involved to have faith in the new system. The Bill states that there is a list of approved arbitrators who are appointed

“by virtue of their qualifications or experience”.

Our straightforward amendment would require the Secretary of State to specify just what those qualifications and experience should be.

During the Committee’s first oral evidence session, we had witnesses who focused on the importance of financial qualifications for the arbitration, because most cases will focus on the financial situation for the parties. One witness had an alternative view, however, and suggested in their written evidence that arbitrators should be legally qualified due to the complex nature of some cases and the need for a fair, transparent process.

When the Bill was introduced, we said that it was crucial that businesses have faith in the whole of the arbitration process. Equally, we said that it was important that the process is transparent and fair. That is why our amendment would require the Secretary of State to outline just what the necessary qualifications and experience should be. That would reassure all those involved in the process that it is being overseen by trusted and qualified individuals and groups.

[Paul Scully]

I think that we all agree about the importance of having the right arbitrators in place to carry out this important work. The Bill already contains steps to ensure that arbitrators will have the necessary qualifications and experience. First, the Secretary of State may approve an arbitration body only if it is considered suitable to carry out its required functions. If the Secretary of State considers an arbitration body not to be properly carrying out its functions, including those relating to the assessment of qualifications and experience, the Secretary of State can withdraw approval.

Secondly, the arbitration bodies themselves are required to maintain a list of arbitrators that are suitable to work on cases that fall under the Bill by virtue of their qualifications or experience. It is right for the arbitration bodies, as the experts on this matter, to determine which arbitrators are suitable given their qualifications and experience. Arbitration bodies that have demonstrated an interest in becoming approved bodies are widely recognised and respected in the field of arbitration, and they are experienced in assessing arbitrators through their accreditation services. That will ensure that we do not unfairly exclude arbitrators by setting in legislation definitions that are too narrow.

However, we recognise that we should not take a one-size-fits-all approach to arbitration, so the Bill provides that arbitration bodies have the flexibility to appoint arbitrators to cases that match their specific qualifications and experience. Furthermore, if an arbitrator does not possess the qualifications required for a particular case, the arbitration body is required to remove them from that case.

The Bill already ensures that arbitration is carried out by suitably qualified and experienced arbitrators. I hope that hon. Members agree that the arbitration bodies are best placed to make this judgment, notwithstanding the clear evidence that we heard of the kind of experiences that we, landlords and tenants expect of arbitrators. I therefore request that the amendment be withdrawn.

[Ruth Cadbury]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

Clause 8 sets out the statutory functions of arbitration bodies approved by the Secretary of State to carry out arbitration services. It is key to enabling the arbitration market to deliver the system that is required to efficiently resolve outstanding rent disputes. The arbitration bodies will be given powers to appoint arbitrators to a case, as well as to remove them if they are deemed unsuitable on certain grounds. The clause also provides that arbitration bodies will oversee cases and set fees for arbitration services, subject to any cap on fees that may be imposed by the Secretary of State under clause 19, as well as dealing with financial arrangements.

If grounds for removal exist, an arbitration body must remove the arbitrator from the case—for example if an arbitrator does not possess the qualifications required for the arbitration. That is integral to the delivery of the arbitration process. It also provides for reporting, to enable the Secretary of State to have clear sight of the progress of the arbitration process.

[Ruth Cadbury]

We have no further amendments to the clause, and we have no further comments to make at this point.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Period for making a reference to arbitration

[Ruth Cadbury]

I beg to move amendment 2, in clause 9, page 7, line 11, leave out subsection (4) and insert—

“(4) A statutory instrument containing regulations under subsection (3) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”

This amendment would require regulations made under this section to be subject to the affirmative procedure.

[The Chair]

With this it will be convenient to discuss amendment 3, in clause 9, page 7, line 12, at end insert—

“(4A) The Secretary of State must prepare and publish a report giving reasons for any extension of the period mentioned in subsection (2) and must lay a copy before Parliament.”

This amendment would require the Secretary of State to prepare, publish and lay before Parliament a report giving reasons for any extension to the period for making a reference to arbitration.

[Ruth Cadbury]

Amendment 2 covers a much wider issue around trust and transparency: the way in which Parliament has full, open access to decision making. The amendment is similar to amendments that Labour colleagues have introduced before in other pieces of legislation that we have otherwise been supportive of on the whole, as we are of this Bill.

Amendment 2 would require regulations to be made according to the affirmative procedure. It would ensure that Parliament can fully scrutinise the extension of the existing six-month period in which businesses can go through the arbitration process. The Bill requires regulations to go through the negative procedure, which means that they would be discussed or stopped only if there was an objection. Our amendment would make the procedure affirmative, meaning that Parliament would have to approve them.

In recent days, we have seen that the Government’s approach to public health issues and, indeed, to the wider impacts of coronavirus can change rapidly, and it is crucial that MPs and parliamentarians are able to debate, scrutinise and assess such changes. Our amendment therefore calls for both Houses to approve any extension to the arbitration process, to ensure that it works for businesses and landlords across the country.

[Paul Scully]

I thank the hon. Lady for her summary of the amendments. The Bill aims to resolve protected rent debt quickly and support commercial tenants and landlords to return to normal operations as soon as possible. We encourage landlords and tenants to resolve unpaid debt between themselves. The arbitration process is designed to allow for negotiation and for the parties to make considered proposals to lead to appropriate outcomes.

The timeframe for making references to arbitration will encourage a speedy resolution of the disputes in scope, and is meant to deal with a particular set of circumstances at a critical time. We believe that six months is enough time to allow eligible tenants and landlords to apply for the arbitration process. However, if there is evidence that the six-month period is not enough, the Secretary of State can, using the power in clause 9, extend it to allow more time for the eligible parties to apply. Any evidence that the power is needed is unlikely to become available until well after the Bill comes into force; it may not become apparent that such an extension is necessary until close to the expiry of the six-month period. The length of an extension would depend on the circumstances, but would be based on feedback from stakeholders. It would be only for as long as is absolutely necessary.

I appreciate the interest in transparency shown by the hon. Member for Brentford and Isleworth, and I reassure her that the decision to extend would be based solely on evidence from tenants, landlords and arbitrators. Officials will continue to monitor the process if issues with the time period arise.

Regulations to extend the application period may need to be made relatively quickly in order to react, so it is important that the Bill remains flexible in case more time is needed. It remains important for the Government to work with Parliament. None the less, we want to make sure that the process can be resolved as quickly as possible, without any undue delay or concern that landlords and tenants will not have their case heard as quickly as possible. We therefore consider the negative procedure to be appropriate in the circumstances. I welcome the hon. Lady’s contribution, but I hope in this instance that she will withdraw the amendments.

[Ruth Cadbury]

If the two amendments are being considered together, I would also like to speak specifically to the other one.

[The Chair]

I said at the beginning that we had come to amendment 2, with which it would be convenient to debate amendment 3. If the hon. Lady would like to include her remarks on amendment 3 when summing up, I am happy to allow that.

[Ruth Cadbury]

Thank you, Mrs Murray, that is very helpful. Amendment 3 would require the Secretary of State to prepare, publish and lay before Parliament a report giving reasons for any extension to the period for making a reference to arbitration. Like amendment 2, amendment 3 is crucial in improving and expanding the scope of parliamentary scrutiny. It calls for the Government to publish a report setting out the reasons given for any extension of the existing six-month arbitration process.

As we said on Second Reading, it is crucial that the Bill has the support of businesses and that the arbitration process is transparent and open, which should include any extension of the period in which rent arrears can be brought into arbitration. Our amendment therefore calls for the Secretary of State to publish and lay before Parliament the reasons for extending the arbitration process.

[Paul Scully]

I hope that, in my opening remarks, I made clear our reasons for asking the hon. Lady to withdraw the amendment.

[Ruth Cadbury]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Paul Scully]

A party that wants to take their dispute to arbitration must first go through a process of notifying the other party and allowing the other party to respond. The clause sets out the timings and the steps to take. The intent is to give both parties enough time through a period of up to at least 28 days from the date of initial notification to try and reach an agreement pre-arbitration.

Arbitration provided by the Bill cannot be used where tenants are subject to, or are debtors under, certain legal compromises or arrangements for debt recovery. That is because the Bill aims to focus specifically on unagreed rent arrears and to encourage negotiations where possible.

[Ruth Cadbury]

I thank the Minister. Again, we do not propose to amend or oppose the clause. I appreciate that the Government have put these measures in place for a reason and we welcome them. I would like to know whether the Government have made any assessment of how many businesses would be unable to go to arbitration on the basis of these limits.

[Paul Scully]

I am not aware that we have made a specific assessment. We have made assessments on the businesses that come within scope and would otherwise go to arbitration because they have not been able to have a satisfactory discussion beforehand. These positions allow parties time to reflect on whether they can reach that settlement in a fair and open process.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Proposals for resolving the matter of relief from payment

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The clause requires the party making a reference to arbitration to include with that reference a formal proposal and supporting evidence. The other party may respond with their own proposal, accompanied by supporting evidence, within 14 days of receiving the applicant’s. The process therefore gives each party the opportunity to review the other’s proposals. The parties then have 28 days from their initial formal proposal to submit a revised proposal accompanied by further supporting evidence—or longer if both parties or the arbitrator agree to allow more time, giving each party time to reflect and respond. That is important, because it facilitates the possibility of a settlement occurring early on in the arbitration process once a reference to arbitration is made. It supports our aim of giving businesses certainty as soon as possible. I commend the clause to the Committee.

[Ruth Cadbury]

I thank the Minister. Again, we do not intend to amend or oppose the clause at this point. We support the proposals for resolving the matter of relief, because, as the Minister has said, it allows tenants and landlords to reach an agreement. We know from stakeholder feedback that this process is welcomed by businesses. It will provide relief, especially because of the block on any court action that it provides. We also welcome it because it allows both parties to make proposals to tackle debt relief. Equally, we want to make sure that there is a level playing field in the arbitration process. We do not want larger companies to be able to muscle through the arbitration process because they have greater levels of resources—both financial and in levels of expertise and so on.

Although we welcome the fact that the process can be extended with agreement, there is an equal chance that, if the process extends and extends even further, it could act as an extra burden on smaller businesses. That is why we hope the Government will look into the accessibility and ease with which small businesses, in particular, can engage in the arbitration process.

[Paul Scully]

We will continue to work with the arbitration services that have expertise in this area, especially as the measure is based on systems specifically targeted at smaller businesses and smaller disputes.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Written statements

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

Statements of truth confirm the veracity of written statements submitted to the arbitrator, and they will be required to verify any written statements provided to the arbitrator—whether by one of the parties or another person—that relate to a matter relevant to the arbitration. An unverified written statement can be disregarded by the arbitrator. It is standard practice in arbitration processes to require a written statement to be verified by a statement of truth. That ensures that parties only make written statements that they believe to be true, ensuring that arbitral awards have a sound basis. I urge the Committee to support the clause.

[Ruth Cadbury]

This is a welcome clause and one that we support. It is vital that statements given to the arbitrator are truthful. That will be crucial when viability is being assessed. Although we have expressed the importance of viable businesses being supported, we appreciate that this is a two-way street, and that businesses need to provide truthful and full information to the arbitrators, as, of course, do landlords. We support the clause.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Ordered, That the Order of the Committee of Tuesday 7 December be amended, in paragraph 1(b), by leaving out “and 2 pm”.—(Craig Whittaker.)

Ordered, That further consideration be now adjourned. —(Craig Whittaker.)

Commercial Rent (Coronavirus) Bill (Fourth sitting)

Ruth Cadbury Excerpts

Committee stage
Tuesday 14th December 2021 Public Bill Committees

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I will speak to clause 23 and schedule 2, as well as amendment 8, which I tabled with my hon. Friend the Member for Feltham and Heston.

The clause prevents rent debts from being collected during the moratorium period, which begins on the day the Act is passed. As we have said previously, we welcome efforts to put a moratorium on the enforcement of protected rent debts, and the clause outlines a number of protections to stop landlords collecting rent arrears debts, including by preventing the making of a debt claim using commercial rent arrears recovery powers or using a tenant’s deposit. The measures have been broadly welcomed by businesses and we support them.

The provisions on the moratorium period cover the period

“beginning with the day on which this Act is passed”.

Last week, Kate Nicholls of UK Hospitality told the Committee that as soon as the Bill is enacted, communications should go out to ensure that commercial tenants are aware of the arbitration process. That point holds for small businesses and independent businesses. I very much hope that the Government will take steps to ensure that the Bill and the protections in it come into force as soon as possible and, equally, that tenants as well as landlords are aware of the protections.

Schedule 2 sets out in more detail the process by which landlords are prevented from making a debt claim and ensures that landlords are unable to take civil proceedings during the moratorium period. We support those provisions, although we know from the feedback we heard during the witness sessions last week the importance of ensuring that tenants are aware of the moratorium period and of the ability to enter into arbitration. Businesses absolutely need to be made aware of the measures.

The schedule outlines in further detail the various definitions used in the Bill, reaffirms that landlords are not able to make a debt claim against protected debts during the protected period, and outlines how parties can apply for debt claims to be stayed while arbitration goes on.

I want to outline the important issues that we raised about the arbitration process. The process should be fair and transparent, and it needs to have the widespread confidence and support of tenants and landlords. As the witnesses in last week’s evidence sessions said, it is crucial that smaller tenants and landlords should not be made to suffer as the result of an expensive or long-running arbitration process in which they are at risk of being muscled out by the greater power of larger organisations. We welcome the arbitration process and the relief that it will bring, but the process itself needs to be fair, and it needs to ensure a balanced playing field.

Schedule 2 also outlines the fact that a landlord may not use the commercial rent arrears recovery power for protected debt, which we welcome. It also seeks to ensure that a landlord is prevented from enforcing a right to forfeit the tenancy in relation to the non-payment of rent. Subsection 9 prevents a landlord from using a tenant’s deposit. We welcome that provision as part of the wider package of protecting tenants and ensuring that landlords cannot seek to get around the spirit of the arbitration process and the protections around arrears.

Amendment 8 seeks to clarify that the definition of debt claims includes claims against guarantors. It aims to provide extra clarity about whether the protections given against county court action are also provided to the guarantors of tenancies. We have received written testimony from experts in the arbitration field and from the head lessee of the Subway chain, who express concern that guarantors and former tenants were not included in the implications of the legislation. I am sure that the Government want to see, just as we do, that the protection against rent arrears action is spread across all the businesses impacted by covid, as well as those that have given the additional support that new and small businesses so often need, such as their guarantors. Of course, many small businesses are franchisees of chains such as Subway, and its head lessee’s evidence must count for a lot of organisations where there is a head lessee and a franchise system.

We do not want to see a back door created whereby tenants are protected from enforcement but the guarantors are still liable. We also heard evidence from the guarantor of a nightclub in Surrey. We have two issues here: the guarantors and the head lessee. It is crucial that the Government ensure that the guarantors of tenants are also protected against debt claims during the prescribed six-month period. We do not want to see the common-sense measures circumvented if landlords are able to go after guarantors with no limit. As I say, the amendment is specifically about guarantors, but we also have concerns on behalf of head lessees.

[Paul Scully]

I thank the hon. Member for her comments. Indeed, I agree with her. She said that she wants the Bill to be passed as soon as possible, so I am speaking as quickly as I can to make sure that we can get that done.

On the communications, we have already given plenty of notice. The original announcement was in June. The policy statement and the code of practice were published. We have hosted webinars with key stakeholders, and we will continue to engage with them. The hon. Member is absolutely right. We want to make sure that this measure is known by all so that they can take advantage of it. If they are unable to settle their rent debts between themselves, we can bring this to a head quickly through arbitration and get back to a normal free market as soon as possible.

On the amendment, I can reassure the hon. Member that we will take full note of written evidence that comes in, but paragraph 2 of schedule 2 already prevents claims against guarantors. It prevents the landlord from making any debt claim in respect of protected rent within the moratorium period specified by the Bill. The provision in question is not limited to claims against tenants, so it does not need to state expressly that it covers claims against guarantors.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 24

Temporary restriction on initiating certain insolvency arrangements

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

Both parties are expected to engage with the arbitration process and must comply with any award made. They may choose to settle the matter by negotiation ahead of arbitration, but other processes that enable the arbitration system to be avoided should not be available. That is why clause 24 prevents a party from proposing or applying for a company or individual voluntary arrangements or certain other restructuring arrangements with their creditors.

[Ruth Cadbury]

Just as we welcome the actions in clause 23, we welcome clause 24 placing restrictions on the ability of either a landlord or a tenant to enter into specific insolvency arrangements when the matter relates to protected rent debt. That is a welcome move, as we do not want to see viable companies going into insolvency because of rent arrears.

Question put and agreed to.

Clause 24 accordingly ordered to stand part of the Bill.

Clause 25

Temporary restriction on initiating arbitration proceedings

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The clause prevents either party from invoking alternative measures that have not been designed specifically for debts related to the pandemic.

[Ruth Cadbury]

We heard in testimony last week that the vast majority of landlords and tenants have been able to reach agreements on rent arrears, and it has generally been a productive and straightforward process. The clause ensures that the tenant or landlord cannot unilaterally start arbitration proceedings and must go through the referral process, requiring the other party also to make submissions in writing. I am interested to hear what steps are in place for businesses, and especially small businesses, when a larger landlord or tenant refuses to enter arbitration fairly.

[Paul Scully]

If both parties wish to resolve their unpaid protected rent debt by an alternative form of arbitration, they may agree to do so. In terms of the arbitration itself, the businesses—either the landlord or tenant—can act unilaterally.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

Clause 26

Temporary restriction on winding-up petitions and petitions for bankruptcy orders

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

Clause 26 and schedule 3 temporarily prevent landlords from petitioning, in relation to protected rent debt, to wind up businesses in scope of the Bill or petitioning for bankruptcy for businesses that are individuals, such as sole traders, that would otherwise be viable. The clause and the schedule support viable businesses by allowing debts to be resolved by mutual agreement or by the Bill’s arbitration system, which considers both parties’ circumstances in the exceptional context of the pandemic. As with the other temporary restrictions in part 3, the restrictions detailed in clause 26 and schedule 3 apply only in relation to protected rent debt.

[Ruth Cadbury]

We welcome the measure in clause 26 as it will prevent landlords from going through a back-door method of targeting businesses unfairly. We also support schedule 3 as it will ensure that viable businesses are protected and can enter into the much-needed arbitration process. Paragraph 3 of schedule 3 ensures that bankruptcy orders in relation to rent arrears made before the day on which the Bill becomes law shall have no power. This will prevent businesses that will be helped by the legislation from being declared bankrupt, which we support as it will protect otherwise viable businesses.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 27

Power to apply Act in relation to future periods of coronavirus control

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The measures in the Bill are a response to the unprecedented impacts of the pandemic and will support commercial tenants and landlords to resolve their rent debt. To ensure that we are prepared for a future situation of a further wave of coronavirus giving rise to further business closures, we are including a power to reapply the provisions in the Bill. This will enable the Government to reapply any and all provisions in the Bill so that we can take a targeted approach to respond to the specific circumstances of any future period of coronavirus.

[Ruth Cadbury]

Given the past few days and the news of business revenues plummeting, we of course welcome the clause. We know that many businesses are already feeling the pinch, as we have seen in the news. There is already worry and concern in the sector about staff shortages and rising supply costs, and on top of that businesses are concerned about customer numbers. The Government appear to rule out any return of covid-related support for businesses, but at least the clause offers some relief in respect of rent arrears. Although we welcome the inclusion of a power to ensure that businesses do not get punished for rent arrears in the future if they are forced to close, I take this chance to remind the Government that businesses are feeling the pinch, even if they have got over the outstanding revenue losses from the previous almost two years. We know that customers are cautious in the face of the new variant, and that businesses will be impacted, so we support the clause.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28

Power to make corresponding provision in Northern Ireland

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The Bill will not apply directly to Northern Ireland. Instead, this enabling power was requested by the Northern Ireland Executive. It is intended to allow them to introduce the measures in the Bill at their discretion. The arbitration scheme remains an option for Northern Ireland while they assess their need for those measures. We will of course continue to work closely with our counterparts in the Northern Ireland Executive.

[Ruth Cadbury]

We welcome clause 28, but our comments and concerns about businesses in England and Wales apply just as much to those in Northern Ireland.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clause 29

Crown application

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The Bill will bind the Crown where the Crown is a landlord under the business tenancies in scope of the Bill. I commend clause 29 to the Committee.

[Ruth Cadbury]

Clause 29 is a straightforward clause, setting out that the Bill binds the Crown. We have nothing further to add.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Clause 30

Extent, commencement and short title

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

This clause sets out the territorial extent of the Bill, which has been carefully considered, and the continued engagement of the devolved Administrations. It reflects the differing needs of each part of the UK and ensures that the tenants and landlords that will most benefit from this measure can access it. It extends to England and Wales, with limited provisions extending to Northern Ireland and Scotland.

[Ruth Cadbury]

We have nothing further to add on clause 30, Mr Hosie. However, this is the last time that we will speak in this Committee, so I will take the opportunity to thank all those who have provided expert submissions to the Committee, who have spoken in the last week and who have sent written submissions. I thank Members for their attendance, and I thank the staff who have administered the Bill so smoothly and enabled us to finish so quickly.

I conclude with an overarching point. Some of the submissions that we have received, particularly this week, from expert bodies with significant legal and other professional expertise in the area of landlord and tenant law, arbitration and settlements still express significant concerns about the detail of the way the Bill is drafted. I hope that between now and Report and Third Reading, the Government will look at their comments, meet them and address some of the detailed and expert points that they raise. I fear that they probably know what they are talking about.

[Paul Scully]

I echo the hon. Lady’s thanks to you, Mr Hosie, to the Clerks and to everybody for making this happen. We want to ensure that we get the Bill into legislation as quickly as possible, but that does not mean that we will rush it and not have further consideration. Beyond the passage of the legislation through Parliament, we will continue to engage with stakeholders, including arbitration services, landlords and tenants, to ensure that we get it right. It is so important that we get this enacted now, so that landlords and tenants can get the benefits when they need them—now, not when it is too late.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.

Bill to be reported, without amendment.