Many of our clients are involved in the commercial property sector, whether as landlords or tenants, and are inevitably finding it very difficult, during the ongoing pandemic, to maintain good landlord-tenant relationships.  We have seen many cases of rent deferments and variations of leases to provide flexibility to tenants who are struggling to keep up with payments as they fall due.

The government has now published its Code of Practice for commercial property relationships during the Covid-19 pandemic.

The Code is voluntary and seeks to provide clarity for businesses when discussing rental payments, deferments and so on. It will apply until 24 June 2021. It encourages both parties to act in good faith and flexibly and suggests various options for new rental arrangements (such as rent free periods, reductions in rent, waiver of interest charges, renegotiating terms of the lease generally).

Service charges and insurance charges are also considered by the Code. For instance, where there has been a reduction in service costs as a result of a lack of use of a property, the Code states that this saving should be passed on to the tenants as soon as possible and before any end of year reconciliation to assist tenants’ cash flow.

The Code acknowledges that many stakeholders are involved in commercial property ownership (for example lenders, utility companies and local government as well as landlords and tenants themselves) and states principles of ‘transparency, collaboration’ and a ‘unified approach’.  

Many businesses face very serious difficulties as a result of the pandemic and these will continue for a long time yet. Hopefully this Code will assist parties in their dealings with each other such that both parties can come to a mutually agreeable (albeit not ideal) solution to assist with the survival of businesses generally.

Please do contact us if you would like to discuss any of these issues in more detail or require assistance with your own negotiations.

Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of advice, recommendation or opinion. DPM Legal Services Limited accepts no liability for any loss or damage, howsoever caused, as a result of any reliance on any information provided.

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