All content on this page is correct as of June 12, 2020
Lockdown restrictions are at long last starting to ease. In England from 1 June schools and a limited number of businesses, have started to re-open and the rules on the number of people who can meet have changed.
The next significant step is that non-essential shops will start to re-open on 15 June, provided that they follow government guidelines to keep staff and customers as safe as possible. Amongst the list of businesses permitted to open are charity shops, fashion retailers and hardware/home stores.
For charities this means more than just physically opening charity shops. It could mean the survival of a charity (by re-starting the flow of income to sustain and pursue its objectives) and the increased wellbeing of the people and communities the charity benefits.
For the retail industry, the re-opening of stores will be a welcome development in terms of economic recovery, though the safety of employees and customers will remain an important consideration.
The government guidelines
The government published eight guides on 11 May, which were all updated on 29 May. The guides cover a range of workplaces (such as shops, offices and restaurants). They are designed to help employers, employees and the self-employed understand how to work safely and support the health and wellbeing of staff.
Businesses should display a notice in a visible place outside their stores or in their shop windows to show everyone that they have followed the government guidance.
The two most relevant to the retail sector are: “5 Steps to Working Safely” and “Shops and Branches”.
The two guides provide detailed guidance on the following:
Social distancing is very much here to stay. If social distancing guidelines cannot be followed in full for particular activities, that business must take all possible mitigating actions to reduce the risk of transmission. Such actions could involve using screens or barriers or reducing the number of people each person has contact with.
Shop layout – will this change and if so, can changes be made freely?
Retail shops will not look the same as they were before lockdown. The whole shop layout will have to be revisited, which may mean moving shelves and racking, putting up screens or barriers to keep people separated, and the closure of fitting rooms.
Freehold owners should be able to implant these changes with no restrictions. For leaseholders, it is advisable to review the terms of the lease to see whether there are any restrictions to make alterations. It is usually the case that structural and external alterations are prohibited and internal non-structural alterations require landlord’s consent (which is often stated to be “not to be unreasonably withheld or delayed”). Some leases may permit the movement of non-demountable partitioning or shelving without landlord’s consent. For shopping centre premises there are often extensive fit out guidelines which must be adhered to. The costs of obtaining landlord’s consent are usually borne by the tenant.
What are landlords doing in preparation?
Landlords of shopping centres are also preparing their properties for re-opening, with the same emphasis on the health and safety of their tenants, staff and customers.
A re-think of the common parts is inevitable. One way systems, floor stickers, increased hygiene measures and increased staff to monitor footfall, manage queuing and ensure social distancing will become the norm.
While it is positive to see landlords making these important changes, tenants will want to know whether these changes lead to an increase in the service charge. Although individual leases may have different provisions, the likelihood is that landlords will be able to pass on these increased costs to tenants via the service charge provisions.
Impact on rents
Landlords should also welcome the news of the re-opening of the retail sector, and the associated improvements to tenants’ income. The rapid onset of lockdown in March saw many tenants either defaulting on, or renegotiating, rent payments for the March quarter date. Given that there is only ten days between the proposed re-opening, and the June quarter date, it seems unlikely that there will be a significant improvement to many tenants’ ability to pay rent.
It is important for landlords and tenants to continue the discussions about each party’s financial positions and to explore the continuance of any temporary rent relief in place or to put such arrangements in place.
The situation is continually evolving and it is still a difficult time for the retail industry. An open dialogue between landlords and tenants is more important than ever.
We are here to help both landlords and tenants. We can offer two fixed fee packages – COVID-19 lease review and COVID-19 rent concession review – to help you plan a return to retail click here.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of June 12, 2020.