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.