Boris Johnson has now changed the focus from staying at home to staying alert. What does this mean for landlords who need to create a COVID-safe environment? How does this look in practice? And who pays?
It will be a long time before the lockdown is fully lifted, but the government’s ambition is for some shops to open in June and parts of the hospitality industry to open from July, at the earliest. Landlords will need to be prepared to deal with a variety of issues; not only continuing demands for rent deferrals and concessions, but also alterations to the premises and health and safety obligations.
What about rent?
Landlords can expect tenants to continue seeking rent deferrals and concessions throughout 2020. Even when commercial premises are allowed to open, physical distancing measures will mean that they won’t be able to operate at full capacity. And then there are the restrictions on pursuing tenants for outstanding arrears – see our recent blog for more information.
Keeping healthy and safe – who foots the bill?
Health and Safety legislation means a landlord has to “take such measures as it is reasonable for a person in his position to take to ensure, so far as is reasonably practicable, that the premises… are safe“. Breach of these duties is a criminal offence but what is reasonable is fact specific, looking at the situation on the ground. To assist, the government has published detailed guidance on how to work safely. As always, the exact meaning of these guidelines will no doubt attract considerable debate.
Landlords of shopping centres, for example, will have an important role to play in considering how physical distancing, visitor circulation, hygiene and other necessary measures are implemented. The government guidance provides, in relation to shopping centres, that landlords should “take responsibility for regulating the number of customers in the centre and the queuing process in communal areas on behalf of their retail tenants“. This may require additional staff to limit the number of people entering the centre at any one time and to make sure shoppers respect physical distancing rules, and even one-way flows through pinch points in malls.
For landlords of multi-let offices, the government guidance recommends “more one-way flow through buildings” and “reducing maximum occupancy for lifts, providing hand sanitiser for the operation of lifts and encouraging use of stairs“. These changes might require alterations to common parts.
Who will be responsible for paying for these changes?
If landlords are looking to recover costs incurred in complying with the government’s guidance through the service charge they will need to review the service charge provisions to check whether this is feasible. There could be other additional service charge costs such as increased cleaning, especially of high contact points, and possibly the provision of additional cycling and showering facilities for those who no longer wish to travel on public transport.
It’s not just landlords who will be grappling with this. Many tenants will want to install plastic screens in retail premises, additional partitions in office spaces and reconfigured kitchen and seating layouts in restaurants and cafes. Whether tenants require their landlord’s consent to these alterations will depend on the terms of their lease: is it an alteration required by legislation? Is it an alteration contemplated by the lease or does it go further and make a structural alteration?
What’s at the end of the rainbow?
COVID-19 has shown that some industries, particularly the services and tech industries, are able to operate seamlessly whilst most of their employees work from home. One well known employer has even announced that some staff will be able to work from home permanently.
Does this mean the demise of the large open-plan office space? No doubt, some office occupiers will look to downsize, use their space more cleverly and re-imagine the way they work.
As our employment partner Ed Bowyer emphasized in a CBI daily coronavirus webinar, flexibility and creativity will be the new mantra for occupiers and their space if they want to find gold at the end of the rainbow.
Our new interactive tracker is a single point of reference for you on COVID-19 real estate specific matters across our global practice. It lets you view relevant guidance and changes to legislation for each country and it also allows you to compare information across different jurisdictions:
COVID-19 Global Real Estate Interactive Map:
Government Response Tracker
For material that will help you run your business, as well as details of our business continuity planning, our COVID-19 Topic Centre houses all of our resources on the topic – from crisis leadership to supply chain.
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