Commercial Tenants, Landlords & Coronavirus - BLM's perspective
Key legal considerations for commercial tenants during the COVID-19/Coronavirus crisis
The COVID-19/Coronavirus crisis has required the government to take unprecedented steps to support businesses. Whilst the Coronavirus Job Retention Scheme (CJRS) has enabled businesses to retain staff, at least in the short term, what help is available to companies struggling to pay their rent?
What support is available to commercial tenants?
- Business rates relief for small businesses plus retail and leisure operators
- The Coronavirus Act 2020 prevents landlords from evicting tenants or repossessing solely on the grounds of non-payment of rent between 26th March to 30th June
- After much pressure from the retail industry, the government recently announced that winding up petitions and statutory demands will be temporarily voided. This prevents landlords using this insolvency process to pressure tenants into payment
- Legislation will also be introduced to prevent landlords sending in bailiffs, unless they are owed 90 days unpaid rent
It is important to note that these measures do not mean that tenants can avoid paying rent or that landlords cannot take action to recover it. A landlord can still enforce a guarantee, call on a rent deposit or take court action for non-payment.
Commercial tenants who have recently completed a new lease may also face problems, as they will be unable to complete their fit-out or commence trading or, having served a break notice, will be unable to remove their equipment or carry out any required repairs to their previous property
With so many elements to contend with during the current pandemic, commercial tenants and landlords have various options on how to come to an agreement to help mitigate these issues, whether it involves extending deadlines, or allowing goods to remain until they can be removed.
What options are available to commercial tenants and landlords during the Coronavirus/ COVID-19 pandemic?
The best advice for both tenants and landlords is to try to agree a concession, which is fair to both parties and formally documented. Examples include a rent holiday or reduction, or a move to monthly rents to ease the pressure. The contract should make it clear whether it is a waiver or deferment of rent, and whether the lease is being formally varied or is a personal waiver.
Can you offer something in return for the concession? Many of our tenant clients have offered short extensions to the term or agreed to increase option prices in return for rent holidays. Consider whether you could defer a break or rent review date.
3. SERVICE CHARGE & INSURANCE
These costs should be reduced at the moment, but your landlord will want to ensure any costs incurred are covered. Discuss whether the landlord would agree to limit the services if a payment is agreed.
4. PORTFOLIO REVIEW
Review all your leases where you are the tenant or have on-going liability under a guarantee (or authorised guarantee agreement). Consider whether you have any break clauses that could be exercised and whether you could terminate your car park licences, for example. Do you have parent company guarantees or rent deposits that could be taken by the landlord? Are you able to sub-divide the space and sub-let in the future? And in the long term could you implement new permanent home working and paperless working to reduce costs?
5. PHASED RETURN
Any discussions should also consider the measures that need to be implemented to allow a return to work. For example, will you workspace need to be altered in any way to allow for continued social distancing? As businesses begin to look forward to reopening or returning to the office, consider what changes need to be made so the space is safe for your employees, and whether these changes require landlord’s consent.
Whatever you do, do not delay, especially with the next rent quarter day approaching on 24th June.
With just under 2 months to go before this key date, speak to BLM's expert commercial property team. We can help you navigate the pandemic.