Coronavirus, Commercial Landlords and Tenants

There is essentially zero certainty as to what is currently going on in the midst of the Coronavirus pandemic.

One of the most turbulent and ambiguous areas of law at present is how will Commercial Landlords and Tenants be affected by the situation and the interim “relief” being introduced by the Government.

The Government published the “Extra protection for businesses with ban on evictions for commercial Tenants who miss rent payments” on the 23rd of March 2020.

In short, Commercial Tenants who are unable to pay rent because of Coronavirus will be protected from eviction, meaning no businesses will be forced out of their premises if they fail to pay rent over the next three months. See Corona Act 2020

Please note however that the rent will still have to be paid at some point – this is only a deferment. The government does hope that following the three month period (and hopefully a return to normality to some degree) Tenants will continue to be liable for normal rent payments thereafter. However, as the situation changes on effectively a daily basis, this could change.

With many businesses facing imminent rent payments, early dialogue and agreeing some form of arrangement between the Landlord and Tenant can often be the best solution.

There are practical solutions which can be encouraged. Landlords are sympathetic to the difficulties faced but will need more information in order to consider Tenants requests about rent. Do not forget that Landlords are also in difficult times!

Possible considerations:

  • Landlords could agree that their Tenants pay rent on a monthly basis as opposed to the traditional quarterly arrangement.  This would assist Tenants with cash flow issues and ensure that if a debt accrues due to lack of payment, it is minimised
  • If Tenants cannot make full rent payments, proposals could be made for a reduced payment. This again minimises the potential losses and takes pressure off of the Tenant to a degree. Please do note the balance will need to be paid later.
  • If the whole rent payment is required by the Landlord, an agreement could be reached for partial payment and partial Deposit deduction on a monthly/quarterly basis
  • If there is no other option apart from deducting rent from the Deposit held, the Tenantand Landlordcan agree to this. However, this must be done on the basis that any deposit used as rent payment must be replenished once normality ensues – which hopefully will be within 6 months.

Of course any arrangement, such as the above, have to be drafted very carefully. It is imperative that any arrangements between the Landlord and their Tenant:

  • Are not varying the lease and rent deposit;
  • Are in place for a specific and set period of time (for example three months)
  • Can be terminated at any time by the Landlord
  • Are made as a concession due to Covid-19 and nothing else.

Tenants should of course, depending on the business, consideravailable Government support for businesses such as:

  • cash grants,
  • business rates exemptions,
  • interest free loans,
  • VAT deferral and
  • 80% funding of salaries for furloughed employees up to £2,500.

Which of these are you taking advantage of?

Additionally:

  • Do you have pandemic insurance cover and/or business interruption insurance?
  • We are aware that law firms are managing to continue fully operating their businesses by having work from home arrangements. Are you and your staff working from home?
  • What business continuity policies do you have? Please send us a copy or a description.
  • Explain how the covid situation has already impacted your business in financial terms (and provide evidence to support this)?
  • Set out how you anticipate the covid situation will impact your business over the next three weeks during this period of restriction?
  • Put forward a proposal regarding rent for the June quarter for our consideration.

Please contact Bowling & Co if you require any advice on the above or preparation of appropriate documents.

If you would like any more information in relation to this article then please feel free to contact me via email: tony.chauhan@bowlinglaw.co.uk or visit my profile.

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