More welcome Covid-19 assistance for commercial tenants

On 19th June the government published a Code of Practice dealing with commercial property negotiations between landlords and tenants during the Covid-19 pandemic (Code). The Code will apply until 24 June 2021.

The Code is voluntary but should assist businesses when they are discussing ongoing rental payments with their Landlords. It is hoped that most landlords will recognise and honour the code although they are not legally obliged to do so. The Code acknowledges that tenants will continue to be liable for payment obligations under leases and encourages those tenants whose businesses have not been overly affected by Covid-19 to continue to make payments in full. No doubt tenants that are struggling are already in negotiation with their landlords regarding payments for the short term and the Code encourages both parties to act in good faith, reasonably and responsibly. The Code suggests various options for new rental arrangements including rent -free periods, varying rents to market value or linking them to turnover, splitting the cost of rent whilst premises could not be opened or changing rent payments to monthly rather than quarterly. Landlords are encouraged to withdraw rental deficits from deposits where held.

If parties are unable to agree a sensible solution they are encouraged to seek the help of an independent third party.

The Code also incorporates service charges and encourages landlords to pass on any savings resulting from a lessening of services during the Covid-19 crisis as soon as possible ahead of the year end reconciliation to help with cash flow and business viability.

Whilst the Code applies to all businesses seriously negatively impacted by the Covid-19 crisis, it is expected that the hospitality, leisure and parts of the retail sectors will need it most.

Finally although agricultural tenancies are governed by a different set of legal rules it is hoped that the principle of the Code will be adopted by landlords when negotiating with tenants.

If you are a landlord or a tenant and would like to discuss any aspect of the Code with us or need our advice as to what your legal rights are during the Covid-19 crisis please contact Philip Dixon on 01256 320555.

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