The Government published a Code of Conduct to promote and try and maintain good relations between Landlords and Tenants as they seek to survive the economic consequences of the pandemic.
From the Tenants perspective, the Code envisages that those Tenants who are in a position to pay their rent in full should do so. Tenants who are experiencing financial difficulties and are unable to pay their rent are encouraged under the Code to engage with the Landlord and to seek assistance from the Landlord. To this end the Tenants will be expected to show why the Landlord should lend such assistance or forbearance and it probably isn’t unreasonable for the Landlord to request financial information to support this request.
The Code recognises that Landlords have their own financial obligations and commitments. The Code recognises and encourages Landlords to assist Tenants where reasonably possible. However the Code recognises that the Landlords ability to offer assistance to Tenants may be constrained by their own financial obligations. While the Code suggests that Landlords should provide concessions where they can, it notes that where this is not possible, Landlords should explain their decision.
The Code envisages that both Landlord and Tenant should act in good faith and in a reasonable and transparent manner in their dealings with each other. They should assist each other in their dealings with Banks, State Agencies and Utility Companies. Where either the Landlord or the Tenant has received Covid 19 payments it should be recognised that these payments have been provided by the Government to help businesses meet their commitments.
The hope is that the Code will facilitate Landlords and Tenants come to a reasonable agreement. Where they haven’t been able to come to an agreement the Code suggests that the Parties could consider Mediation.
The Code provides a sample of issues which the Landlord may take into account when considering a Tenant’s request to a rental holiday/suspension/reduction, including:
- Any closure period impacting the Tenant’s business, and its ability to trade via other means;
- The duration and extent of restricted trading due to social distancing requirements;
- Added costs incurred through measures to protect employees and customers and to adhere to social distancing requirements;
- Government assistance received and how this is being used.
From a Tenant’s perspective what they are hoping to achieve is either full or partial rent free periods or alternatively, but less beneficially, a deferral of the whole or part of the rent for a period.
Ultimately the Code is voluntary and the Landlord cannot be coerced into offering assistance to the Tenant. Their respective legal rights are reserved. If no agreement is entered into then the terms of the existing Lease continue to have full force and effect. However in many instances it is in the Landlord’s interest to ensure the continued viability of the Tenants business. This is particularly important with the uncertain economic times that lie ahead. The future of many of the high street businesses and the hospitality sector is very uncertain and it is preferable to afford assistance to the current Tenant rather than adopting a rigid approach to the Tenants obligations and end up causing the business to close or the Tenant to shut up shop.
Reasonableness in your dealings as between the Landlord and Tenant is the essence of the Code.