New voluntary code encourages flexibility among landlords and tenants

The Government of Jersey has introduced a voluntary code for commercial landlords and tenants which is a welcome acknowledgement of these unusual times, according to a partner at Bedell Cristin.

Jeff O’Boyle, partner and head of property at the international law firm, said that the code is to encourage commercial landlords, in particular, to be flexible and to grant concessions, for example on rent, to tenants. The code is a positive move that reflects the current economic uncertainty caused by the coronavirus pandemic.

“Many businesses are facing significant disruption in the current climate and this voluntary code is designed to help business relationships to survive and, ultimately, to encourage positive and open dialogue between landlords and tenants,” said Mr O’Boyle.

The code does not release either party from their obligations under the terms of their lease but it does provide a framework to structure a temporary, voluntary agreement that enables both parties to survive the current crisis.

“The likely beneficiaries of the code are going to be tenants who are struggling to pay rent, but of course both parties may be suffering financial hardship so the code is a two-way street,” said Mr O’Boyle.

“The code specifically accounts for the inability to meet lease obligations, the type of voluntary arrangement that can be put in place to account for this – likely a deferral or waiver of rent payment – and a formalisation of that agreement.”

If a party cannot meet their obligations they are required to give the other party one week’s notice and then they must evidence their inability to perform their obligations. The two parties must then seek to agree either a partial or complete deferral of the obligations, a partial or complete waiver of the obligations or an early termination of the lease, returning the premises to the landlord.

A written agreement should then be prepared and signed by both parties. This prevents either party from commencing legal proceedings against the other throughout the agreed period of deferral or waiver.

Mr O’Boyle said: “The voluntary code is a welcome acknowledgement from the Government of Jersey that these are challenging times for many businesses and the spirit of the code dictates that parties need to deal with each other with transparency, flexibility and reasonableness.

“The Jersey community has pulled together at this time so, in most cases, this should be a mutually agreeable process. However, of course there will be concerns about abuse of the code and it doesn’t account for every circumstance imaginable.

“If any commercial tenant or landlord is uncertain of how they should approach a discussion with the intention of coming to a voluntary agreement they should seek legal advice.”