As restrictions start to ease and the public cautiously steps out, blinking, into the sunshine of spring, the Government has published its updated (and snappily titled) Code of Practice for commercial property relationships during the COVID-19 pandemic. But what does it actually say, and what can landlords and tenants take away from it?

The first thing to say is that it is not new - it was first published in June 2020, but has been updated to add some further clarity and to bring the guidance in line with market sentiment in the hope that landlords and tenants heed the advice and ride out the storm together.  Unless extended further, the guidance is to stay in place until 24 June 2021.

It is worth remembering that those tenants who are fortunate enough to be able to pay their rents should continue to do so, so that landlords can best assist those who are struggling to keep afloat.  It is also worth remembering that it is intended to be of temporary assistance and normality should resume once a tenant is back on its feet.

The guidance has tried to codify its message into four key principles:

  1. Transparency and collaboration.  Raising the concept of collaboration, partnerships and good faith.  Parties should work together, transparently, to achieve a balance.
  2. Unified approach.  Helping and supporting one another with all dealings with other parties (from governments and utilities providers to banks and other financial institutions).
  3. Government support.  The various reliefs offered by Government are made so as to ensure businesses can meet their commitments (including rents).
  4. Acting reasonably and responsibly.  The spirit of co-operation should be adopted.

When requesting some form of concession, the guidance provides that a tenant should be open and clear as to why such concession is needed and should furnish the landlord with sufficient financial information to enable it to make an informed decision.  The detail provided will vary from case to case, but the idea of transparency should apply to all.  There is also an onus on landlords to give concessions where they can – or be clear why they cannot.

The guidance also lists a number of considerations for the landlord when assessing the impact of COVID-19 on a tenant.  These include:

  1. Whether the period(s) of closure have affected the tenant’s ability to trade;
  2. What impact social distancing has had on trade;
  3. Additional costs flowing from this (e.g. additional safety measures);
  4. What the needs of banks, staff, suppliers etc. are, and how they will be/have been affected;
  5. What (if any) Government support has been received (or is available) and how this has been utilised;
  6. The tenant’s prior conduct as to lease performance;
  7. The impact support may have on the tenant’s competitors and on other support already offered to tenants; and
  8. Alternative considerations in a regulated sector (e.g. the Pubs Code).

In addition, the paper sets out some suggestions for the parties to consider.  Amongst other things (and the list is not exhaustive) this includes: fixed rent-frees; rent deferral(s); monthly payments; rent reductions; drawing down on rent deposits with a longer window for topping up; or reversionary leases in exchange for any such concessions.

Overall, the guidance is fairly uncontroversial and tallies with the approach many are already taking.  It is, however, useful to have the weight of Government behind the proposals as it should lead to more compromises being reached and, hopefully, a quicker recovery for all. The elephant in the room, of course. is what happens after the guidance falls away and the other support schemes taper off later in the year as is suggested?  Many think that it is only these lifelines that have enabled tenant businesses to survive.  If they are forced to fend for themselves once more, we may well see a spate of insolvencies and lease forfeiture events, not to mention landlords who have also been struggling under this increased burden.  The hope is that Government and/or the various stakeholders implement additional measures to mitigate against this collapse before we see a reduction in Government intervention.