June 23rd, 2020 / Insight posted in Articles, Operations

Government releases code of practice for commercial property relationships during the Coronavirus pandemic

The impact of Coronavirus has been huge on both landlords and tenants due to the majority of commercial tenants’ inability to meet their rental deadline, which has been seriously diminished by the lockdown with forced closure of their properties and the resulting loss of income. Although the government has begun to gradually ease lockdown with the opening of non-essential shops from 15 June, income remains limited and with the next quarter’s rent due on 24 June, both landlords and tenants are worried.

The overriding message from the government throughout the crisis has been that we are all in this together, so with this in mind on 19 June they released a code of practice to assist both sides during negotiations. The code is voluntary and does not override UK property law, but does apply to the whole of the UK and ALL commercial property (including agricultural land). The code of practice sets out a range of behaviours and conduct which both parties should bear in mind during uncomfortable conversations or future negotiations. However, it may be sensible to assume that conduct in relation to the code will be considered in any future legal disputes by the courts.

The code aims to encourage tenants and landlords to work together to support each other as the country continues to emerge from the pandemic and the substantial government support packages are withdrawn. The code acknowledges that the full economic impact is still yet to be felt, so the basis of it is being reasonable and supportive. Yet the code is clear that tenants that are able should still try and meet their rental commitments. Much of the code is common sense, but the sections headed “new arrangements” and “service and insurance charges” do provide some good examples of ways in which tenants and landlords can support each other. The code will apply until 24 June 2021, which the government hopes will be long enough to take us through the move out of lockdown and the return to more “normal” trading conditions.

While the code has no bearing on lease obligations, it is likely to encourage people to be more wary of behaviours and perhaps encourage better co-operation between the two parties. It is also important to note that if the two parties agree either a temporary rent concession, or lease arrangement to see them through the current crisis and its aftermath, they must properly document the discussions and legal advice should always be obtained before any such terms are agreed.