Both landlords and retailers will be looking ahead to the next quarter day (and next rent payment date under most commercial leases) on 24 June with great trepidation. On the last rent payment date, 25 March, tenants only paid approximately one-third of their estimated £2.5 billion rent payments.  With the majority of physical stores not set to open until 15 June at the earliest, most retailers’ finances won’t be any healthier come 24 June and landlords are braced for even worse rent payment figures. However, in an attempt to avoid this potential catastrophe, the government is working with businesses and trade associations to publish a new code of practice that aims to provide both landlords and retailers with clarity over the payment of rent and arrears during the coronavirus pandemic.

Whilst no one can dispute it has been an incredibly tough time for most retailers, the financial strain caused by the coronavirus pandemic is also being felt by landlords and their lenders. After an initial clampdown on aggressive tactics employed by some landlords to recover rent arrears, the code of practice will encourage fair and transparent discussions over rent payments and provide guidance on the payment of rent and arrears. Although many retailers have worked with landlords to reach agreements over rent reductions or deferrals, switched to turnover related rent or changed the frequency of payments to assist with cash flow, some have simply refused to pay any rent at all, even where they could afford to do so. Therefore, a clear code of practice that shares the financial burden caused by the coronavirus pandemic equitably between lenders, landlords and retailers is essential if they are to survive.

Although the code is likely to be temporary, voluntary and too late to have much impact on the rent paid (or more likely not paid) on 24 June, any measures that encourage collaboration and co-operation between landlords and retailers is a positive step forward, particularly if this approach can be taken in to the post Covid-19 world. It seems likely that such discussions will speed up the transition to a greater proportion of rent being linked to turnover whereby the landlord and retailer share the risks and rewards of how a store performs.  However, in order to make this work, both parties must be willing to share financial data that until now they have been unwilling to do.