Commercial leases in Jersey - Practical considerations arising from new guidance for the Covid-19 period
First published by Connect Magazine, June 2020
Tenants of commercial premises in Jersey suffering financial hardship may be considering, or may indeed have already approached their landlord with requests for rent relief. In response to the challenges faced by commercial tenants as a result of the current health crisis, the Government of Jersey has released Guidance on Commercial Leases.
The Guidance is intended to “…promote good conduct and reasonable behaviour from both landlords and tenants during the COVID-19 Period, by seeking to minimise interference in the normal contractual relationships between Landlords and Tenant.” The Guidance is separate to the temporary legislative amendments and related Guidance issued in relation to residential property.
The Guidance will last throughout the ‘COVID-19 period’, which has, at least initially, been determined to be until 30 September 2020. It provides a set of overriding principles to guide rent relief negotiations between landlord and tenants with the aim to assist both landlords and tenants in their dealings with one another.
In the case of a commercial lease, whether or not to grant any form of rent relief ultimately remains a matter for the landlords’ discretion and tenants should not assume they are entitled to relief under the Guidance. Tenants are required to demonstrate financial hardship to the landlord providing sufficient information to them, where requested. For example, a landlord may reasonably require a summary cash flow statement.
Tenants should continue to pay rent where they are able to do so. In the event tenants consider they will be unable to meet their next rent payments, the Guidance recommends they engage in pre-emptive, regular and transparent communication with their landlord. It will of course be up to the parties to negotiate and agree upon temporary arrangements for each tenant, on a case by case basis, taking into account their particular circumstances.
For both landlords and tenants of commercial premises in Jersey there will be a number of factors to consider when agreeing upon any temporary rent relief arrangements, including: for what period any rent suspension or waiver should apply; whether any initial agreed period can be extended; where a suspension is granted, whether the landlord requires interest to be paid; and whether the landlord can change its mind and revoke any temporary relief.
Landlords may also wish to consider whether it might be reasonable to agree to some change of the existing lease that they consider beneficial to them, for example, by extending the term of the lease. The Guidance provides that any agreed concessions should be formalised in a contractually binding Temporary Voluntary Arrangement.
Whilst the Guidance is advisory, applies on a voluntary basis and does not impact the validity of existing obligations within a commercial lease, the Courts will be entitled to take into account the conduct of both landlord and tenant in any future proceedings relating to rent arrears, lease cancellations and consequential orders for possession and eviction.
