Harsh and uncertain times for commercial Tenants and Landlords
Most commercial landlords are proactive, they will understand their tenants’ business, and they will be in regular contact with their tenants to find a way through the next few months. Where there are ‘sound’ tenants who need a little assistance during the months of lockdown, there is no harm in the Landlord and Tenant finding an agreed way forward (even informally). This might be through deferment of rent (and service charge) payments, or temporary reduction in the amount of rent payable or even a rent free period (this may well be appropriate for businesses which trade from a shop, as an example, where the cash available to pay rent is dependent on trading).
The Government announced on 23 March that there will be relief from forfeiture for tenants who do not pay their rent in the following 3 months. This takes away one recourse that any commercial Landlord has for non-payment of rent. However, it is important to realise that rent is still due and payable. The Government has not announced a rent moratorium. The period of relief is 3 months from the time the rent is due only, and the rent remains payable. There is discussion about the cashflow problems being stored up for businesses when forfeiture becomes a part of the landscape of remedies available to landlords, and two quarters rent becomes due and payable in June !
The Government announcement is set out in this link
Robert Jenrick Housing Minister has stated :
“We are protecting both people and their businesses by providing the urgent support they need.”
“We know many commercial landlords are already setting a great example by working closely with tenants and offering rent deferrals or holidays.”
“However, these new measures will provide reassurance to businesses struggling with cashflows and ensure no commercial tenant is evicted if they cannot pay their rent because of coronavirus over the next 3 months.”
A rollover of the relief cannot be ruled out but this could lead to problems for Landlords who have covenanted to repay a lender each month. Will the government assist them ?
There are still remedies available to landlords, where a landlord feels a tenant is not engaging during this period having not paid any rent. The most common that may be used is serving a statutory demand on the tenant, giving a set period of time to pay, effectively formal notice of the debt. Once the set period of time has expired the landlord can issue winding up proceedings (if the tenant is a company). For obvious reasons, this may not be the best option , particularly where the landlord wants to continue letting the property to the same tenant after business returns to a semblance of normality. There may also be a period of time after the “lockdown” period where letting a vacant unit, shop or office premises may be exceedingly difficult !
Essentially, the message is for both tenants and landlord to be pragmatic, and discuss sharing the pain involved in missed rent payments if both parties wish to work together in the future.
If you have any questions or need help from one of our property lawyers contact Darren Millis on 01908 689319 or email dmillis@geoffreyleaver.com
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Darren Millis | Partner