Government to publish New Code of Practice for Commercial Letting
On 29 May 2020 the Government announced an intention to issue a new Code of Practice to provide high street businesses and landlords with clarity and reassurance over rent payments. The purpose of the new Code of Practice, which will be developed between Government and Trade Associations, is to support high street businesses through the Coronavirus pandemic. The Code will help to guide and encourage parties to work together to protect viable businesses and ensure swift recovery.
A working group has been established by the Government to develop the Code with a view to encouraging fair and transparent discussions between landlords and tenants over rental payments during the pandemic. The guidance will also cover rent arrear payments and treatment of those who are subletting and suppliers. It is hoped that it will enable collaboration and cooperation within the sector to ensure that no one part of the supply chain shoulders the full burden of payment.
The group has indicated that they will seek to involve wider business input through its sector members to ensure a greater number are consulted and able to share their views prior to the Code being published.
Community Secretary, Right Honourable Robert Jenrick MP, said that he expects all parties to come to the table so that our high streets and town centres are in the best possible position to come back from these challenges. He hoped that the new Code would give “clarity to landlords and tenants who are both facing equal pressures on their finances so they are all able to stabilise their finances and bounce back”.
The Chancellor of the Exchequer, Rishi Sunak MP, stated that “we continue to work with lenders to ensure flexible support is provided to commercial landlords, including payment holidays and restructuring facilities, and it is right that where landlords receive support, they extent this to their tenants”. This statement appears to be contrary to the experience a number of commercial landlords are facing when dealing with their lenders, where they are coming under increasing pressure to meet their obligations, which they then have no option but to pass on to their tenants.
The Code will be temporary in nature and the Government is considering options to make it mandatory, if necessary. It is expected to be published prior to the next quarterly rent payment date.
It is expected that ahead of the June payment day, all main commercial lenders should be in contact with their major commercial landlord borrowers to identify concerns that they have and provide support where appropriate. How productive those discussions will be remains to be seen.
The Government has already sought to introduce a package of measures for the commercial sector which includes the following:
Measures under the Coronavirus Act 2020 to prevent any business being forced out of their premises if they miss a payment until 30 June 2020.
Under the Corporate Insolvency and Governance Bill, which is yet to be passed, there are proposals to temporarily ban the use of statutory demands between 1 March 2020 and 30 June 2020 and winding up provisions presented for Monday 27 April to 30 June 2020. These provisions are not yet in force and considerable discussions around the Bill is still taking place.
Proposals have been made to introduce legislation preventing landlords from using commercial rent arrears recovery unless they are owed 90 days of unpaid rent. These provisions have been discussed by Government but have yet to be implemented.
The Government has been quick to emphasise that the measures do not amount to a rental holiday but are intended to allow breathing space for tenants facing significantly reduced income due to the closure measures and current economic circumstances. It has been emphasised that rent is still owed and that those tenants who are able to pay some or all of the rent are expected to do so.