high street shops

The government is set to intervene in wranglings between retailers and landlords during the coronavirus crisis with a new code of practice.

The new code is being developed with industry bodies on either side of the talks and would give “clarity and reassurance to both,” said communities secretary Robert Jenrick.

“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,” he said.

“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.”

Chancellor Rishi Sunak said landlords receiving payment holidays from their lenders were expected to extend the support to tenants.

Landlords have been banned since March from evicting commercial tenants for non-rent payment. That was followed in April by a ban on landlords issuing statutory demands or winding-up orders, which the British Property Federation complained could be exploited as a “rent holiday”.

The BPF also raised fears that the protections, which last until 30 June, could stall talks between some retailers and landlords by removing an immediate incentive for negotiation.

Today’s government announcement said the existing protections ”do not account to a rental holiday but allows breathing space for tenants facing significantly reduced income due to the closures measures and current economic circumstances. Rent is still owed, and those tenants who are able to pay some or all of their rent are expected to do so”. 

It’s hoped the code will provide more clarity over either sides’ obligations ahead of the next rent day on 24 June.

“The government is committed to supporting the commercial rental sector as it deals with the disruption caused by the coronavirus outbreak,” said Sunak.

“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.”

The Ministry of Housing, Communities & Local Government said the code would encourage transparent discussions between landlords and tenants over rental payments during the pandemic, as well as guidance on rent arrears payments and treatment.

Read more: How would turnover-based leases work for retailers and landlords?

It said the code would be temporary but that the option of making it mandatory would be explored.

Retailers are pushing for a radical shake-up of lease terms in the wake of the pandemic. Last week, M&S CEO Steve Rowe revealed the business was renegotiating “onerous” leases and would walk away from properties if necessary “because the world will never be the same again”.

There are growing calls for future rents to factor in a retailer’s turnover, but property agents have highlighted reluctance from landlords, who see more value in leases based on fixed rent.

BRC CEO Helen Dickinson said of today’s announcement: “The coronavirus pandemic has accelerated longer-term trends in retail property. Rent demands are increasingly out of kilter with current property values and many retailers are being forced to pay rent on closed stores.

“We welcome the government’s code as a positive first step and are working constructively with it and landlords to ensure that otherwise viable businesses are not forced into administration. However, all sides must be prepared to do more if necessary, given that the commercial lettings market is in need of wider reform.”

Read more: By tying landlords’ hands, the government has stored up a crisis for retail

BPF CEO Melanie Leech said: “Coronavirus is placing an unprecedented strain on property owners and the businesses who occupy their buildings, and we need a united approach in response. The majority of property owners and tenants are already working well together, effectively engaging and agreeing sustainable plans, and we welcome the opportunity to work with government and others to codify this good practice.

“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.”

UKHospitality CEO Katie Nicholls said: “A code of conduct is a significant step in unlocking the current impasse in the commercial property market. Now is the time for all stakeholders to come to the table and broker an agreement. 

“Hospitality businesses have seen revenues all but dry up since March, so government intervention is desperately needed - with a sustainable financial plan in place. 

“Our sector needs enforceable measures in place, so that the burden currently borne by operators is shared more equitably. This code could be pivotal in protecting communities and high streets from mass closures and job losses.”