Code Of Practice For Commercial Tenants Published

On 19 June 2020 the government published the code of practice announced on 29 May 2020 and aimed at relationships between commercial landlords and tenants – Code of Practice for commercial property relationships during the COVID-19 pandemic. Although the initial announcement focussed on retail tenants, the code is in fact aimed at all commercial tenancies and is not limited to the retail sector.

The highlights:

  • The code is voluntary but has been endorsed by a number of high profile signatories eg British Property Federation, British Retail Consortium, RICS;
  • The code emphasises that where tenants are able to continue to pay their rent, they should do so. Where they can’t landlords and tenants should enter into open and transparent discussions with a view to reaching an agreement which will allow both parties’ businesses to survive the crisis;
  • Tenants seeking concessions should be clear with their landlords about why this is needed and prepared to back up their request with financial information about their business. Landlords should provide concessions where they reasonably can, taking into account their own fiduciary duties and financial commitments, and where they cannot they should be prepared to explain why.
  • Possible options include: rent free periods, deferrals, rent reductions to current market rent, waiving contractual default interest, splitting the cost of unoccupied periods. The tenant might also make concessions in return in appropriate circumstances eg a reversionary lease on reasonable terms, removal of a break right;
  • Service charge and insurance – these are items provided at cost and should be paid in full where possible but landlords should pass on any reductions in service charge (eg as a result of properties being unoccupied) at the earliest opportunity rather than waiting for the annual reconciliation.

The full code can be found here.

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