The UK government announced on Friday it is working with commercial landlords and tenants on a new code of conduct to ‘encourage’ fair and transparent discussion over paying rent.
While many landlords and tenants have co-operated over rent since the pandemic hit, both sides say there are some who have not.
In the UK, landlords say that a moratorium on evicting commercial tenants - which runs until the end of June - has been seized on by tenants as a breathing space to stop paying rent, in some cases when landlords say they can and should pay.
In a joint landlord-tenant petition to the Treasury in April, promoting a furlough space grant scheme (FSGS), they argued such behaviour could even threaten the financial ecosystem because if landlords can’t pay interest and fulfil loan agreements as a consequence of losing rent, then the financial system will be weakened.
The FSGS, involving a government contribution to property costs, would be very expensive and there is no update on whether it would happen.
While the government does not seem to be proposing to legislate and says the code will be temporary, today’s press release does say that it ‘will explore options to make it mandatory if necessary’.
Property trade bodies such as the British Property Federation which have been engaged in the discussions with the government along with the British Retail Consortium believe the government may not now extend the eviction moratorium as had been expected.
Richard Croft, executive chairman of M7 Real Estate which has a €5 bn pan-European portfolio, said there were ‘at least 10 companies, mainly very large ones’ which had not co-operated with his team, including retailer Matalan.
M7 is modelling to collect only 60% of total rent across Europe due after the looming June Quarter Day, compared with circa 98% before the crisis.
Croft said the problem for landlords is that in order to help the tenants who need rent relief the most, ‘other tenants need to recognise their responsibility to pay’.
Communities Secretary, Robert Jenrick MP, said: ‘We expect all parties to come to the table so our high streets and town centres are in the best possible position to come back from these challenges.
‘We are giving 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, said: 'The government is committed to supporting the commercial rental sector as it deals with the disruption caused by the coronavirus outbreak.
‘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 extend this to their tenants.’
Melanie Leech, chief executive of the British Property Federation, said: ‘Fair collaboration among lenders, property owners and tenants is vital to the UK’s recovery and it will ensure that viable businesses in distress as a result of coronavirus are supported, to protect both people’s jobs and the local authorities, savers and pensioners who own the majority of our town centres.’
