Business

Landlords and tenants . . . getting on terms

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Brian Henning

THE pandemic has had a significant impact on many businesses' ability to pay rent, and as a result there has been much talk about the negotiation that is taking place between landlord and tenant.

In response to the growing number of commercial rent disputes, Rics has launched a commercial rental independent evaluation service to help landlords and tenants negotiate payments during Covid-19.

The service is designed to ensure a clear, balanced dialogue between landlord and tenant, including an incisive analysis of the tenant's grounds for non-payment and the landlord's prerequisites for making concessions, and comes in response to government's recently launched Code of Practice for commercial property relationships during the Covid-19 pandemic.

The Code of Practice contains recommendations that landlords and tenants use a third-party mediator to help with any payment negotiations during this difficult period of time.

To ensure the new service would help all parties involved, Rics consulted widely across the sector. Following the consultation, the product aims to alleviate the pressure on both tenants and landlords and give tenants a ‘safe space' to articulate their difficulties and have landlords recognise them. It also aims to ensure landlords have a rigorous dispute resolution process to ensure all parties can maintain a positive working relationship post Covid.

As part of the process, the commercial rental independent evaluation service rules provide a tight timetable and clear structure for evidence to be presented and examined by an Rics appointed independent evaluator. The service also sets out a clear and affordable schedule of fees, for both small and large properties, ensuring the costs are matched to the size of the dispute. Evaluators also aim to provide a resolution within 28 days.

Rics hopes that this service will contribute to the recovery of a fully functioning commercial market as the sector navigates this difficult time period, and will provide landlords and tenants with the inclusive and safe space they need to work out how to resolve any disputes.

Rics recognises that parties need a safe, unbiased pair of hands, appointed and overseen by a manifestly independent institution to guide them through these unprecedented times.

While the pandemic was something no one expected, the fallout over non-payment of rents is leading to a fractious break-down of some landlord and tenant relationships, which will have long-lasting impacts on the sector, investments and the economy.

Research suggests that the rental income lost to the UK's property industry totalled £1.5 billion for the March quarter alone, to the detriment of the annual returns for pension funds, insurance businesses, REITS and other investments. At some stage this will begin to impact the incomes of large parts of the population and the wider economy.

The government's Code of Practice called for landlords and tenants to act responsibly and suggests the use of a third-party mediator to help. The introduction of Rics' commercial rental independent evaluation service is a means to resolve these outstanding disputes in a cost effective and timely manner.

The sooner landlords and tenants can agree terms, the sooner we will see a semblance of normality return to commercial property. And who doesn't want that?

:: Brian Henning is Northern Ireland region chair of the Royal Institution of Chartered Surveyors (Rics), the principal independent body representing professionals employed in the land, property and construction sectors.

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Business