In the words of Amelia Earhart: “The most difficult thing is the decision to act!” As the crunch quarter rent day approached in June, the commercial property sector was anticipating a new Code of Practice for Commercial Property Relationships. The code is now out, but the government has fluffed its lines.
Some tenants want rent concessions without justifying them, leaving landlords frustrated and unable to reach an informed decision. Will the code help? Only maybe.
What should happen?
Tenants who cannot pay in full should communicate with their landlords and pay what they can, making service charges and insurance the priority. Landlords should reciprocate, offering support to those most in need where they can (backed by the flexibility promised by lenders) and reducing service charges to necessary expenses.
What does communicate mean?
Tenants should be transparent and provide financial information about their business. Landlords refusing concessions should make clear why they are doing so.
What happens if the code is followed?
Agreement should usually be possible, giving both parties certainty, steadying cashflow and relationships as businesses restart. The list of options in the code may help.
What happens if not?
Even before the code, most landlords and tenants were negotiating sensibly. A code with some ‘teeth’ might have been better: a duty to be transparent, with consequences for default. Instead, the code’s hope that “best practice becomes common practice” will make little difference to those who are intransigent.
What can landlords do with tenants who refuse to justify themselves?
The decision to act may be the easy bit. With the strongest enforcement action now put off again until 30 September, their hands are tied. They could just give in to demands, but if not, then their choices are to wait it out, consider a county-court rent claim, or look carefully at the effect of their tenant’s future insolvency.
Rob Nicholson is partner at Ashfords and Andrew Walker QC is a barrister at Maitland Chambers
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