Commercial landlords urged to show forbearance

Updated / Thursday, 1 Oct 2020 12:36

Leo Varadkar said 'nobody wants to see vacant premises in our towns and villages or our shopping centres' (Pic: RollingNews.ie)

By Will Goodbody

The Government has urged commercial landlords to show forbearance to tenants who cannot meet their obligations under their leases because of the financial pressures caused by the Covid-19 pandemic.

The request came as it published a new voluntary code of conduct on commercial rents that has been agreed between landlords and business representatives.

The code sets out principles of engagement which both landlord and tenants should commit to abide by in order to prevent disputes arising during the pandemic.

It suggests that full or partial rent-free periods, a split in the cost of the rent between landlord and tenant and rent reductions to a current market rate and/or a proportion of turnover should be considered where tenants cannot pay in full.

"Nobody wants to see vacant premises in our towns and villages or our shopping centres," said Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar.

"Landlords should be willing to do what they can to help their tenants to continue to operate rather than facing the risk of a vacant premises and inability to obtain new tenants."

"Equally, tenants should pay what they can and speak with their landlord when difficulties arise."

The code will remain in place until 31 July next.

It comes as many businesses are unable to pay their rent due to the financial pressures they find themselves under arising from the Covid-19 pandemic.

In some cases, landlords have initiated legal action against their tenants seeking to have rents paid.

The code was promised by Fianna Fáil, Fine Gael and the Green Party in the Programme for Government.

It has since been developed through a process of consultation with stakeholders, including Ibec, Chambers Ireland, Retail Excellence Ireland and Irish Institutional Property which represents more than a dozen large real estate companies, who together manage over €14bn in Irish property assets.

The code recognises that both sides have a common interest in working together to enable businesses to keep operating and that it is in everyone's interest that terms are agreed amicably.

It also requires them to act in good faith and in an open, honest and transparent manner.

It says that any tenants who are in a position to pay should do so.

But if they cannot pay they should seek agreement with their landlord to pay what they can.

Commercial landlords have been asked to provide concessions where it is possible and where it is not, the code asks them to set out why.

It also outlines the issues to think about when considering whether a business has been adequately impacted for concessions to be considered, such as closure periods and ability to trade via other means, as well as options for any new arrangements.

Both parties remain obliged to meet the current terms of the lease unless a renegotiation is achieved.

"Everyone in the business community will need to demonstrate flexibility and forbearance if we are to limit the long-term economic effects of this crisis," said Ian Talbot, chief executive of Chambers Ireland.

"Throughout this crisis Chambers Ireland has argued that 'those who can pay, should pay' and we continue to reiterate this."

"But this needs to be complemented with a realistic and pragmatic approach from all creditors, and particularly landlords that have tenants that are struggling to meet their obligations."

Retail Ireland welcomed the development saying it hoped it would lead to more realistic and constructive engagement by landlords to resolve the challenges presented to retailers by Covid restrictions.

"The new Code will hopefully encourage more landlords to sit down and work out practical solutions with tenants, which reflect the massive financial strain Covid has placed on businesses," said Retail Ireland Director Arnold Dillon.

"It is in everyone's interests that disputes are resolved quickly and fairly, in a way that safeguards jobs and the viability of businesses into the future."