Negotiations with Landlords

19th June 2020

UPDATED FOR NEW CODE OF CONDUCT LAUNCHED 19 JUNE 2020

Rent can be a substantial cost in any business and it is well worth seeing if your landlord would agree to some support your business to help you through a cash squeeze.

A new code of conduct provides support to shops and local firms planning their future recovery with their landlord.

Whilst landlords will not want to defer the rent – landlords will range from large equity investment funds down to individuals for whom your rent is their pension – they will all know that if your business fails, they will have no rent, and will also have to pay the rates, insurances and utilities themselves until they find a new tenant.

And that could take many months.

So, to get your landlord to agree to a rent waiver or deferral, just remember the following:

  • Keep your request realistic;
  • Be clear on what you want – is it a deferral or a complete waiver? One quarter, or longer?
  • Speak to them before you do anything like stopping rent payments;
  • Explain to them what else you have done to cut cashflow – furloughed staff etc;
  • Offer a repayment plan with dates;
  • If you have a break period coming up, and you want to stay in the property anyway, consider if there is a better deal to be had for confirming that you will not exercise the break;
  • If you have multiple properties, consider engaging a commercial property agent to advise on options, which might include surrendering a property if it is surplus;

It is in your landlord’s best long-term interests to have a good tenant, paying rent, and early discussions with well-based reasons and supporting cashflows will go a long way to securing their support. 

COVID regulations

Government support for commercial tenants dealing with the COVID-19 pandemic has been extended by three months from 1 July 2020 to 30 September 2020 and includes:

  • The Coronavirus Act suspends the forfeiture of evictions from from 26 March 2020 to 30 September 2020 (previously only to 30 June), meaning no business will be forced out of their premises if they a miss a payment.
  • Landlords are prevented until after 30 September 2020 (previously until after 30 June) from using Commercial Rent Arrears Recovery unless they are owed 189 days of unpaid rent.
  • The Corporate Insolvency and Governance Bill temporarily bans the use of statutory demands and winding-up petitions where a company cannot pay its bills due to coronavirus, until 30 September.

The suspension of the forfeiture of evictions will come as a relief in particular to pubs, cafes and restaurants, after the hospitality sector called upon the government for action in this area.

UK Finance has also confirmed its members’ continued support for commercial landlord customers including amendments to facilities and capital payment holidays.

Code of conduct

A new code of practice has been developed with leaders from the retail, hospitality and property sectors to provide clarity for businesses when discussing rental payments and to encourage best practice so that all parties are supported.

These interventions are in addition to other government support to businesses during the pandemic.

The code is voluntary for businesses and is relevant to all commercial leases held by businesses in any sector which have been impacted by coronavirus. 

It encourages tenants to continue to pay their rent in full if they are in a position to do so and advises that others should pay what they can, whilst acknowledging that landlords should provide support to businesses if they too are able to do so.

The code was developed and coordinated by the UK government alongside a working group of the following, who have all endorsed the code; British Chambers of Commerce, British Property Federation, British Retail Consortium, the Commercial Real Estate Finance Council, Revo, the Royal Institution of Chartered Surveyors and UKHospitality.

The working group was also supported by Trowers & Hamlins LLP who provided expert legal advice during the code’s development.

To date, a number of other organisations have also endorsed the code including; Agricultural Law Association; Association of Convenience Stores; British Beer and Pubs Association, British Independent Retailers Association, Central Association of Agricultural Valuers, Country Land Association, Federation of Small Businesses, Property Owners Forum, Scottish Property Federation, Tenant Farmers Association and Tenant Farmers Association Cymru, UKActive and UK Major Ports Group.

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