Coronavirus Update - Tenant and Landlord Commercial Property

The Government published its policy regarding the extra protection it is providing for business on 23rd March and the new rules essentially prohibit Landlords from evicting Tenants who have been unable to pay their rent because of the Coronavirus. These new rules are currently in effect for 3 months but that may change. The link to the current rules is set out below:

https://www.gov.uk/government/news/extra-protection-for-businesses-with-ban-on-evictions-for-commercial-tenants-who-miss-rent-payments

Presently, the Government expects Tenants to begin paying rents normally after the current 3 month deferment period but that could change. Whilst rent payments can be deferred under the new rules, the rent will still have to be paid eventually. It is, however, not clear at present as to when the deferred payments will have to be made.

We are receiving many enquiries from both Landlords and Tenants on the rent issue and our recommendation is that Landlords and Tenants communicate with each other to try and agree a mutually acceptable arrangement.

Whilst Tenants are often in financial difficulty if they are unable to continue running their business, it should be highlighted that Landlords often rely upon the payments of rents by their tenants to fund their own businesses. Indeed, for some individuals, those rents represent a large proportion of their retirement income. However, we have found that most Landlords that we talk to are sympathetic to the problems that their Tenants are facing.

Aside from the Government’s proposal which effectively allows a tenant to defer rent payments for a full three months and pay any deferred rent payment at some as yet unspecified future date, we have set out below some alternative suggestions as to various arrangements that Landlords and Tenants could consider:

  1. Agree that rent can be paid monthly, rather than quarterly, so as to ease cashflow for the Tenant
  2. If cashflow is drying up, agree to reduced rent payments being made on account, with the balance being paid later.
  3. If the Landlord is holding a rent deposit, agreement could be reached for the landlord to draw down some of the deposit to use towards the rent payments with the tenant paying the balance. Agreement would have to be reached over the topping up of the rent deposit at a later date.

It is important that care is taken in documenting any agreement reached to avoid the terms of the lease and rent deposit being varied permanently. Any arrangement should be made strictly on the basis that:

  • It is a concession and is only being made as a result of the Coronavirus pandemic.
  • It is not a variation of the lease, nor of any rent deposit deed that may be in place.
  • It is temporary – say, 3 months – it can then be reviewed on expiry of that period if necessary

It reserves the right for the landlord to terminate the arrangement on notice. It is important that the landlord has the ability to terminate the concession in the event of the terms of any it being breached or if the tenant’s circumstances change e.g. if the Tenant obtains or could obtain the benefit of support from the Government.

It is worth pointing out that the Government has a number of support measures in place to help support business through this unique period. Those measures can be found in the link below:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

Tenants should be encouraged to consider applying for whichever of these measures as may be appropriate which may enable them to pay the rent due under their lease or a proportion of it.

Please contact us if you would like advice on any of these issues and we would be delighted to assist. Our staff are currently working remotely and so we are fully functional and able to provide our usual levels of service.


Andrew Peach

Andrew Peach

Partner

Tel: +44 (0)1306 502270

Office: Dorking

Email: a.peach@downslaw.co.uk