It is not immediately clear what the new policy adds to the existing Government Guidance, which also aims to provide a framework for parties to a commercial lease to come to suitable arrangements in recognition of a tenant’s individual circumstances. We have summarised that Guidance here.
It does seem however that this new policy is intended to steer conversations with tenants of Government premises towards rent waivers, as opposed to rent deferrals. The Minister for Infrastructure, Deputy Kevin Lewis, makes the point that deferring rent is not always the best long-term solution for businesses which still have virtually no income as it merely compounds their debt.
Landlords of commercial premises in Jersey will by now be well aware of the Guidance on Commercial Leases provided by the Government of Jersey and may well have agreed some form of rent concession with their tenants. The Government Guidance is intended to last throughout the ‘COVID-19 period’, which has, at least initially, been determined to be until 30 September 2020 although it is probable that this period will be extended.
The Guidance provides a set of overriding principles to guide rent relief negotiations between landlord and tenants with the aim to assist both parties in their dealings with one another. In essence, where a tenant believes they will be unable to meet their next rent payments or are at risk of becoming insolvent, the Guidance recommends they engage in pre-emptive, regular and transparent communication with their landlord. The Guidance sets out a range of potential rent relief arrangements, which include both rent suspension and indeed a complete waiver of lease sums.
In our experience, the vast majority of cases landlords and tenants have been able to reach mutually acceptable arrangements to navigate the current difficulties. Such arrangements have not always included a complete waiver of lease sums but instead have depended upon the particular circumstances in each case, in accordance with the aim of the existing Guidance.
For those commercial landlords in Jersey who are experiencing issues with tenants who are either unable or perhaps unwilling to meet their obligations under a commercial lease, the position remains that it is ultimately a matter for them as to whether or not they are prepared to negotiate and agree upon temporary arrangements for each tenant, on a case by case basis and taking into account their particular circumstances.
Commercial landlords in Jersey may wish to consider whether any initial agreed period of deferral, or indeed waiver of lease sums, can be extended. Where a suspension is granted, landlords may also wish to consider whether they will require interest to be paid. 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 Government Guidance remains advisory, however 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 orders for possession and eviction. In our experience, this has led to commercial landlords adopting a very measured response in order to assist tenants who are facing financial difficulty. For many landlords they will recognise that it may not be possible to find a replacement tenant in quick order and will wish to avoid a resulting rental void that would likely follow.
There may of course also be commercial or reputational reasons why landlords would want to engage with a tenant, including in circumstances where there may be risk of the tenant becoming insolvent.
Commercial landlords should be aware that Jersey does not have an equivalent of the rescue procedures available in England & Wales, or indeed the concept of English law ‘administration’. Although certain Jersey procedures, such as a ‘remise de biens’ do offer a suspensory or moratorium effect, this is not comparable to procedures that are known to have a rescue element, such as administration or company voluntary arrangements (CVAs) in England and Wales.
This means that in Jersey there is no mechanism by which a tenant company can carry on its business during insolvency, albeit with limited exceptions. Directors of tenant companies will also be well aware of their duties under The Companies (Jersey) Law 1991 which provides that a company must cease to carry on its business from the commencement of winding up procedures, except so far as may be required for its beneficial winding up. It is therefore absolutely key that tenants facing insolvency engage in pre-emptive, regular and transparent communication with their landlord.