Coronavirus (COVID-19) FAQs for commercial property landlords and tenants

As the UK deals with the coronavirus outbreak, considerable strain is being put on commercial property landlords and tenants. Our Dispute Resolution Partner Maeve England and Commercial Property Partner Justin Hopkins answer the most frequently asked questions.

What help is there for businesses unable to pay rent?

The government has introduced measures to protect commercial tenants in the Coronavirus Act 2020. Section 82 of the Act prevents landlords from evicting commercial tenants, whether by changing the locks or by commencing court action for possession, during the period commencing 26th March and ending on 30th June. There is also the option for the government to extend this period if needed.

The measures in the Act will mean no business will automatically forfeit their lease and be forced out of their premises before that date if they miss a payment due under the lease. If proceedings to forfeit the lease have already been started in court, no order for will be made for possession to occur on a date on or before 30th June.

Does this apply to all businesses?

The measure covers business tenancies, but not licences to occupy or tenancies at will or certain other tenancies such as farm business tenancies and tenancies that do not exceed 6 months.  If you are unsure whether you have a lease or a licence, you should seek legal advice.

Do business owners need to apply for this relief?              

No, the measures will apply automatically to all eligible tenancies. Tenants should be aware that the measures in the Act are not a rental holiday. All commercial tenants will still be liable for the rent and will have to make this up at some later date. Therefore it is strongly in the interests of commercial tenants to speak with their landlord about their situation and agree on a course of action.

What should businesses do where a landlord has already evicted them?

The protection only applies during the “relevant period”, which started on 26th March and will end on 30 June 2020 “or such later date as may be specified” by the government. If therefore a landlord has already repossessed a premises, the protection will not apply. If proceedings have been started however, any order cannot be for repossession on a date before 30th There are provisions in the Act dealing with orders for possession which have already been made and which fall on a date on or before 30th June.

All of the above is good news for commercial tenants, but what about the commercial landlord, who, after all, also has a business to run?

What can landlords do if their tenant does not pay?

For landlords, in the immediate aftermath of the crisis it will be preferable by far to have tenanted premises and tenants whose businesses have the best chance of surviving and thriving. All commercial tenants will still be liable for the rent and will have to make this up at some later date.

Opening channels of communication now with tenants and working collaboratively to find solutions for the short and long term, is often the best way forward. Many landlords are offering rent concessions, such as varying the frequency of rent payments, agreeing a rent suspension, agreeing to base a proportion of rent on percentage of turnover, or accepting a reduced rent for a temporary period.

General best advice is to talk with your tenant or landlord. This is not a moment to stick heads in the sand. Landlords and tenants should also check their insurance policies and speak to their insurers to see if they are covered for business interruption, although there may be exclusions for force majeure events (which vary from contract to contract) and pandemics.

Finally, remember that leases vary and will have different provisions, such as, potentially, a rent suspension or a force majeure clause. The implications of these clauses can be significant and we strongly advise that landlords and tenants seek legal advice before taking action.

The situation is constantly evolving and we are monitoring developments in this area but if you are concerned about where you stand with regard to your commercial premises please get in touch or  are happy to help at this uncertain time.

Mogers Drewett

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