Almost three weeks ago I wrote an article urging all those involved in commercial property to be kind. To not take advantage of people. To understand that we are all in times never seen before.
I did this because it was obvious to me that as we were entering these times, and knowing that people show their true colours in a crisis, we were likely to see some unsavoury behaviour as the economy hit a wall and some Landlord-Tenant relationships were inevitably about to come under immediate strain.
Such behaviour is not conducive to working one's way through lease agreements that don't have the teeth to deal with the fallout from a pandemic and associated rapid shutting down of the world's economy, nor finding one's way to a short term one-off agreement with compassion; one that shares the pain but works for all.
Being kind, looking after each other - catch phrases of the Covid-19 pandemic crisis. They do not just apply to making sure your elderly neighbour is OK. They are values and behaviours that are vital to navigating our way through business relationships at this time.
The current problems facing Landlords and Tenants, caused by the pandemic, are not of their making. Neither party is at fault. So by working together, looking after each other, and diving into the situation with a sense of community, everyone has a chance of coming out of this in way better shape than if a self-centred me-first approach is adopted.
That is counterintuitive to many in a commercial environment. 'What's best for me?' 'How do I profit from this?' generally prevails, notwithstanding the lip service that is often paid to trying to arrive at a win-win outcome to any commercial negotiations. Lip service isn't good enough here.
Over the past three weeks I have been involved in 35 cases, working for both Tenants and Landlords. I have seen, heard and learnt a lot. I know I have also brought objectivity and encouraged transparency in each negotiation. Above all though, we have managed to find agreement and provide certainty to Tenants and Landlords, allowing them to focus on their respective current business challenges. In doing that we have had to encourage an atmosphere of cooperation, a togetherness rather than division or opposition.
As we have all seen, this is a fast changing environment. This is not helpful, as time ticking by is increasing stress levels amongst the business community, and allowing too much time than is acceptable to elapse before many Tenants and Landlords are achieving any certainty about how much rent and outgoings are to be paid.
People like certainty. They need it. In a rapidly changing environment where uncertainty about the timing of moving to lower Alert Levels is completely unknown, and another rent payment date is fast approaching, this matter needs to be dealt with, and quickly. Get some certainty brought to the table.
There is no template, and there is no formula. As someone said to me the other day - 'there is no cookie cutter' to resolve this issue.
What is clear though, is that in a crisis, rules don't apply. By that I mean that we may as well put to one side whatever it is the leases say. If lease terms are strictly adhered to, a significant proportion (and by that I mean most) of all Landlord-Tenant relationships, and leases, will not survive.
It also doesn't actually matter if a lease stipulates how to resolve this issue in a pandemic (none do). If a Tenant cannot afford what the lease says they should pay in such circumstances anyway, what then?
So, it is down to negotiating a settlement that works for both the Tenant and the Landlord, something that in itself is a test of the quality and depth of the relationship between the two.
If ever there was a time to understand whether effort has previously gone into nurturing a strong, transparent, trusting relationship between a Tenant and a Landlord, this is it. If it has, there is every possibility that they are now working together in reaching a collective agreement that gives as good a chance as possible of the relationship, the lease, and both the Tenant's and the Landlord's business surviving.
If there is no such background and relationship, the chances of achieving that are proving to be lower and unnecessarily taking more time. Unfortunately, in such situations there is commonly a level of intransigence born out of an 'us and them' mindset.
Much of my work over the past ten days has been in Australia. The Australian Federal Government has issued a 'Mandatory Code of Conduct' setting out leasing principles to be followed in arriving at a formula based solution to what rent should be paid, and when.
Whilst I welcome an attempt at providing some guidance on principles to be followed, my own experience of the application of the Australian Code has shown me that a Government issued prescribed solution is not the answer.
There are however lessons from the Code that need to be understood and can be taken on board by the business community in New Zealand, a community that is screaming out for workable solutions to be agreed between commercial Tenants and Landlords.
The 'mandatory' Code allows for individual agreements that do not follow the Code to be reached (so how mandatory is mandatory?), each State is yet to bring the Code into their local legislation, and in fact it has as much uncertainty in it as the inclusion of 'fair proportion' in our own No Access clauses in post 2012 ADLS leases.
I won't go into the detail of the Code here, but am happy to discuss it with anyone who thinks it might form at least a starting point for their own negotiations.
So, what to do from here? Quite simply, look after each other, be kind, sit down and (likely to be via Zoom) agree an approach that gives everyone the best chance of getting through this, both Tenant and Landlord.
Something that has shone through to me in all cases I have been dealing with is the importance of transparency, irrespective of how good or bad the prior relationship between the parties was. In times of stress, and as the next rent payment dates are approaching for many, it is time for those Tenants and Landlords who have not yet resolved this to, well, get on with it.
Don't wait for the Government to intervene. For several reasons it is not going to happen, and we don't want it to happen. Any Government prescribed 'solution' would bear the hallmarks of 'one size fits all', and this crisis calls for case by case treatment. Let's learn from what is happening in Australia in this regard, use some of that experience as a guide, but not wish for similar intervention.
The enormity and duration of the approaching economic difficulties have not yet dawned on most. I really don't think it is overstating it to say that things are never going to be the same, so now is not the time to dig the heels in; it is time to collectively arrive at an agreement that works for all parties in a commercial relationship and to start working towards a healthy, open, transparent and trusting relationship going forward.
I should say that I have over the course of the last three weeks met some wonderful people, intent on cutting to the chase and finding common ground. I have also met a few so-and-sos who have been obstructive. A reminder that a typical cross section of life tends to present itself in extreme times.
Thank you to those who have made the process easy with brief discussions, swift consideration of proposals and agreement to workable solutions.
Finally, if you as a Tenant or a Landlord wish to consult your lawyers for advice on how to proceed, that is your prerogative. With respect to my friends in the legal profession, I should say now that your lawyers are unlikely to help conclude a satisfactory outcome. As I said in my last article, your lawyers will confirm what your leases say and what they mean. As I say above, in a crisis the rules (in this case, leases) don't apply.
These are such extreme times that agreements being reached in respect of what rent and outgoings are due right now are going to be a one-off, involving a reasonable degree of hard-to-swallow subjectivity, and not following any specifics of a clause you will find in a lease. This has proved to be true in all cases I have recently been involved in.
Innovative solutions are being found, case by case. That is a good thing, and we can all learn something along the way.
Feel free to give me a call or send me a message to discuss any matter to which I can provide some input. I have thoroughly enjoyed my involvement in helping those who have contacted me so far. You know who you are.
Remember, I'm not charging for those chats.
In the meantime, be kind to one another. Look after each other. They are not only the sayings of the day, they are the way we are all going to get through this, personally and commercially.
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