The industry appreciates the government initiatives to combat the economic fallout and assisting business to facilitate a balanced set of boundaries for landlords and tenants to work within, however the most recent proposed parameters within the “Commercial Tenancies - Mandatory Code of Conduct” incorporating percentage turnover adjustments to vary rental payment is too simplistic and problematic.
There is no doubt that a large portion of tenants are struggling, some more than others.
Basing reductions in rent however on the drop in turnover is inappropriate and does not reflect the true position of business performance.
Turnover figures reflect extremely differently across different industries and the consequential effect on the bottom line.
It also doesn’t take into account the generous incentives already handed out as this does not relate back to turnover.
Landlords that charge gross rents are also at a big disadvantage as a large part of the rent is attributed to outgoings so a percentage drop will have a relatively harder impart on the landlords that pay the outgoings directly.
Tenants are really being asked to self-assess and landlords need to accept it on face value. Some sort of financial verification needs to be provided in the future to quantify the loss.
In essence there should be no mandatory or automatic structure to base a rent reduction or relief, it is simply unworkable and could most definitely cause a greater imbalance if enforced than leaving it to landlords and tenants to negotiate their own positions.