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12 June 2020
Due to the COVID-19 pandemic, the Jersey courts are prioritising criminal cases and those involving children and are unlikely to deal with property-related matters, including rent arrear and lease cancellation proceedings and orders for possession and eviction (tenancy disputes). As such, on 9 April 2020 the government issued commercial property guidance, to be read in conjunction with practice directions to be issued by the courts, to encourage landlords and tenants to negotiate temporary compromises with regard to lease obligations in a reasonable manner if either party experiences financial difficulties arising from the pandemic.
As regards residential tenancies, on 9 April 2020 the states approved regulations to temporarily amend the Residential Tenancy Law (Jersey) 2011. No regulations have been enacted in relation to commercial leases as no similar statute governs these. Under the regulations, guidance for residential tenancies must be issued by the minister for children and housing, but no such guidance had been posted on the government's website at the time of writing.
This article deals solely with commercial leases.
The government's commercial property guidance does not release either party from its obligations and operates only during the period specified by practice directions. While the guidance is advisory, and compliance therewith is voluntary, the courts can take the conduct of both landlords and tenants into account in any future tenancy disputes (which the government hopes will be a last resort) once the moratorium ends and may draw adverse inferences and make such orders as they see fit in respect of non-compliance. In contrast, the residential tenancy regulations have the force of law.
Types of lease to which the commercial guidance applies
The commercial guidance applies to any lease, tenancy, licence or other agreement which provides for the occupation of commercial property on commercial terms. This includes offices, retail, hospitality and leisure units, warehouses, registered lodging houses (but not individual lodging units) and any property which is part commercial and part residential.
Both parties must act in an open, transparent and reasonable manner under the guidance.
The guidance covers both rental payments and obligations (eg, repair and decoration) due by the tenant.
Tenants must give their landlord at least one week's notice of their financial difficulties and their cause (which must relate to COVID-19 restrictions), together with supporting evidence. Landlords can reasonably require further evidence.
Landlords can be required to enter into a confidentiality agreement in respect of the details provided by tenants.
Parties acting reasonably will seek to agree a temporary voluntary arrangement (eg, rent reduction, rent deferral, change from quarterly in advance to monthly in arrears, deferral of obligations or lease surrender) and document this in a written agreement.
If the landlord is also suffering financial hardship to an extent that it would be unreasonable for it to agree a payment or obligation concession, it must provide evidence of its financial hardship in writing to the tenant, which can be required to enter into a confidentiality agreement in respect of this information. If the landlord is suffering financial hardship, it need not agree a concession.
Each party must advise the other when its circumstances change and when it is no longer suffering from financial hardship or an inability to comply with the lease terms to the extent that it can once again discharge all or some of its obligations under the lease. In these circumstances, the parties must reassess the temporary voluntary arrangement on the same principles.
Landlords can also give notice to tenants that they cannot comply with certain obligations under a lease because of financial hardship. In such cases, they must provide financial information to the tenant in support of this claim. The tenant can be required to enter into a confidentiality agreement in respect of this information.
If a tenant is suffering financial hardship to an extent that it would be unreasonable for it to agree a payment or obligation concession, it must provide evidence of its financial hardship in writing to the landlord, which can be required to enter into a confidentiality agreement in respect of this information. If the tenant is suffering financial hardship, it need not agree a concession.
Effect of temporary voluntary arrangement
A temporary voluntary arrangement may be used:
No tenancy disputes can be initiated if the parties comply with a voluntary temporary arrangement.
Only the parties are bound to a temporary voluntary arrangement.
Effect of no temporary voluntary agreement
While compliance with the guidance is voluntary, if either party acts contrary thereto and is unreasonable in not agreeing to a temporary voluntary arrangement that was requested by the other party, the courts can take this conduct into account in any tenancy dispute and draw adverse inferences and make such orders as they see fit in respect of any non-compliance.
Landlords and tenants should abide by the 'six Cs' during the COVID-19 crisis:
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