The impact of a second lockdown on landlords and tenants
Following a second lockdown, Commercial Property Partner Justin Hopkins reviews the key points from the governments Code of Practice for both landlords and tenants which apply until 24 June 2021.
The voluntary set of guidelines is aimed at encouraging landlords and tenants to recognise the unprecedented challenges presented by COVID-19 and to work together to identify mutual solutions but as we enter a second lockdown could this code have a more authoritative role in the future?
What is ‘best practice’ according to the Code?
The Code is clear that tenants, who can pay rent, should pay rent. For those tenants who cannot pay rent, the Code recommends parties collaborate to negotiate affordable rental agreements.
The Code does not have the same status as a ‘pre-action protocol’, meaning that legal proceedings could be raised by either party without the need to show that they have paid any attention to the Code.
However, landlords and tenants should keep a close eye on whether the Code becomes something which is relied upon in any future court action. It is easy to see a situation with a tenant being pursued by a landlord for arrears or, a particularly evasive tenant may seek to utilise the Code to argue that proceedings have been raised prematurely.
On the other hand, parties would be foolish to ignore the Code. In any subsequent court action, the court is unlikely to look favourably on those who do, for example those tenants who simply stop paying and do not engage with their landlords in meaningful dialogue. After all, the purpose of the Code is to seek to find solutions that benefit both businesses – the tenant’s and the landlord’s.
It is, therefore, important for the parties to seek to engage not only with the Code itself but also with the spirit of it and to take into account:
- the impact of the restrictions on tenants, including closures and shortened opening hours
- extra costs involved in adhering to social distancing
- government support offered to tenants
- reduction of service charges where lack of use of the property has lowered the service charge costs incurred
The impact of a second lockdown
As we begin to see more lockdowns being imposed by the government, it may become increasingly difficult to advocate for widespread adherence to the Code without legislative measures to bring it into law.
Hindsight may show the Code to have been unfair to landlords, for failing to address situations where a tenant is being affected by restrictions for one or more physical shop unit, but is performing strongly elsewhere such as in online services.
Where the government wishes to bring the Code onto a statutory footing, revisions and amendments should be made to the current form, committing tenants to payment of lease liabilities such as rent arrears.
If you are a commercial landlord or a tenant that needs advice on what is required of them at this time to be Covid-19 secure, please get in touch with Justin Hopkins on 01935 813 691 or email justin.hopkins@mogersdrewett.com.
Alternatively if you have reached a point where you cannot see how you can move forward with your tenant or your landlord then please contact our Dispute Partner, Maeve England on 01225 750000 or email maeve.england@mogersdrewett.com. We are here to help you and your business, whether you are a landlord or a tenant, to move forward safely.