The impact of Covid-19 on Commercial Landlords & Tenants

The impact of Covid-19 on Commercial Landlords & Tenants

Tenants of commercial properties that cannot pay their rent because of the spread of Covid-19 will not be evicted under new rules announced by the government in their emergency legislation. While there has been much commentary on payment holidays for mortgages in the residential sector, it appears that this will also be applicable in the commercial sector as well.

While the government has announced its plans for rates relief and government loans and grants for businesses struggling with the impacts of Covid-19 pandemic there has not been any specific guidance in respect of the payment of rent and in particular, the protection of tenants in the event that they cannot pay.

These new measures will mean no business that occupies commercial premises will be forced out of their premises if they miss a payment of their rent in the next three-month period. This comes in good time for tenants with the first rent quarter of 2020 now with us.

It is usual for most leases to contain provisions that in the event rent remains unpaid for a period of 21 days, then the landlord can proceed to take steps to forfeit the lease. However, right for a landlord to forfeit a commercial lease as a result of non-payment of rent has now been suspended.

In the current unprecedented position in which we find ourselves, Landlords should think carefully before simply taking back the property. Taking occupation will mean assuming the responsibility for the security, insurance and any future repair of the property will fall to the landlord until a new tenant can be found. Finding new tenants, given the current economic climate arising from the pandemic, will not be easy.

Landlords should consider their options which may include agreeing rent reductions, rent holidays, payment plans, debt claims for any outstanding rent, claims against guarantors (if there is one) or negotiating a new lease, if appropriate. It may be that a deal can be agreed with the tenant in respect of the arrears that accrue over that three-month period.

As commercial tenants will still be liable for the rent after this period, the government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.

Before taking any steps as outlined above, it is strongly suggested that legal advice is sought. For more information and guidance on the contents of this article please contact Alex Jeffery via email or via telephone on 01752 292350.

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