Across the UK, businesses are feeling the impact of the measures taken by the Government to tackle the Coronavirus pandemic. With forced closures, huge reductions in sales and a sharp downturn in required services, commercial tenants may be struggling to meet their lease obligations. As a commercial landlord, how should you respond to the crisis?
Maintaining a good relationship with your tenant and helping to ensure they survive this difficult time, continuing to occupy your premise in the long term are important considerations. The current climate is difficult for everyone, personally and on a business level, so keeping open channels of communication is highly recommended.
You may have tenants approach you requesting a rent concession. They could seek a rent deferral, a discount or change to the frequency of their payments. You are under no obligation to agree to a concession, and you may have your own financial burdens which make it impossible. However, if you can offer a level of flexibility and come to an agreeable solution, it may be mutually beneficially in the longer term.
If you do manage to come to agree a concession, fully document any changes in very clear terms and ensure both parties sign the agreement, to avoid any future disputes. It is highly advisable to seek legal assistance to ensure any such agreement covers all the necessary ground taking into account factors such as interest, rent deposits, guarantors and generally the technicalities of how the concession will be structured and agreed.
What if your tenant fails to pay rent?
The Coronavirus Act which came in on 25 March 2020 removes your right to exercise forfeiture for what is termed “the relevant period”. This is defined to run from 25 March 2020 until 30 June 2020 “or such later date as may be specified by the relevant national authority”. It is also worth noting that the Coronavirus Act means you will not be able to use delays in tenants paying rent over the next three months as a reason for opposing a lease renewal on the ground of persistent delays in paying rent.
Although you cannot exercise forfeiture for this period, the Coronavirus Act simply postpones the tenant’s financial obligations and requirement to pay until the “relevant period” expires, so as a landlord you are not agreeing to waive their rent payment. Other remedies for non-payment are still available to you, which may include taking money from a deposit, pursuing a personal guarantor or petitioning for the tenant’s bankruptcy. However, these options could risk leaving your property empty at a difficult time, so discussions with tenants to structure rental payments are likely to be the way forward.
Open channels of communication and collaboration are vital – generally both parties will have a vested interest in agreeing suitable concessions where possible.
It is important to seek legal advice in any dealings involving property assets and changing the agreement you have in place with your tenants.
If you have any legal questions regarding your commercial property contract, contact Jon Frayling on firstname.lastname@example.org for advice on your options and how best to proceed.