Commercial agents and landlords must look to work with tenants to agree how to clear any outstanding Coronavirus-related rent arrears to avoid a long and costly arbitration process, according to Propertymark.

The Commercial Rent (Coronavirus) Act 2022, which has now received royal assent, sets out a legally binding arbitration process in England and Wales for those who have not yet reached an agreement.

It applies to commercial rent debts of businesses such as pubs, gyms and restaurants that were mandated to close, in full or in part, from March 2020 until the restrictions ended for their sector, providing them with further protection now the moratorium on evictions has expired.

For tenancies that fall within scope of the Act and have failed to reach agreement, either party can apply for arbitration unilaterally within six months of 24 March, the date the legislation came into force.

Arbitrators may award a reduction of protected rent debt and/or time to pay, with a maximum period to repay of two years.

Timothy Douglas, Propertymark’s head of policy and campaigns, said: “The best course of action for commercial landlords and tenants is still to try to negotiate their own agreements to clear outstanding debts using the Code of Practice.

“This will avoid the uncertain decision, and the cost and time consequences that will result from a referral to arbitration.

“The legislation is clear that arbitration should be a last resort. The measure of its effectiveness for the cases that do have to go down that route will rely on consistent decisions and awards handed down by the arbitrators across the country.”