The Department of Business, Enterprise and Innovation published a Code of Conduct between Landlords and Tenants for Commercial Rents (“the Code”).
The Code will remain in place until the 31st July 2021.
The Code acknowledges that commercial landlords and tenants have a common interest to work together to enable businesses to continue operating during the Covid-19 pandemic.
The purpose of the Code is to promote engagement between the parties with a view to achieving mutually beneficial outcomes.
The Code is a voluntary code with no statutory basis. However, landlords and tenants are urged to act in an open and transparent manner and to provide each other with sufficient and accurate information within the context of negotiations to achieve outcomes consistent with the Code.
Tenants seeking concessions are encouraged to explain the basis for their request and to provide supporting financial information to the landlord.
Un-controversially, while the Code (as expected) requires a tenant to provide financial information, interestingly (and perhaps controversially), the Code also states that each party should provide “sufficient and accurate information” to the other. This begs the question whether, in the context of negotiations, the landlord would be expected to share with their tenant the fact of and information relating to loan deferrals or other supports received by the landlord. In circumstances where the Code envisages parties negotiating in good faith, a landlord could find it difficult to withstand a request for such.
Landlords are encouraged to provide concessions, if possible, having regard to their own fiduciary duties and financial commitments. The Code acknowledges that in certain situations, the landlord may not be able to provide such assistance.
The Code sets outs a non-exhaustive list of options for new arrangements which could be agreed between landlord and tenants.
These options include;
- agreeing full or partial rent- free periods;
- landlords drawing from rental deposits on the understanding that the landlord will not then require that the deposits be replenished before it is reasonable and realistic to do so;
- landlords waiving interest on unpaid rents or rents paid in arrears to make payments plans more affordable;
- landlords and tenants agreeing to split the cost of the rent for any unoccupied period in the premises.
In terms of service and insurance charges, the Code acknowledges that these should be paid in full in order to keep well- maintained properties. However, given the current economic climate, the Code also provides guidance as to how these payments may be facilitated and/or reduced.
The Code suggests that the alternative dispute mechanism set out in the lease be used. Invariably, such provide for arbitration. Arbitration can be as lengthy and costly as (if not more so) litigation.
As an alternative, the Code suggests mediation in situations where landlords and tenants have followed the Code’s principles, have not reached any agreement, but believe a resolution could be found through alternative dispute resolution mechanisms. The Code provides that the landlord and tenant should bear their own costs of the mediation and that the process should not prolong or frustrate attempts to reach an amicable solution.