There is almost no business sector within the UK that is not affected by the Coronavirus. Many businesses will occupy tenanted properties and will be concerned about their ability to pay the rent. Unfortunately, the wording of most commercial Leases does not provide much help to a Tenant, especially given that their building is still useable and available for occupation.
Therefore, any discussions between Landlord and Tenant need to be undertaken by agreement and there is no doubt that these relationships will be tested. Our advice to Landlords is to take a pragmatic approach about the options that they have available to them. Every situation will be different, but below are a few options that may be available to the parties: –
The Landlord will still expect the full amount of rent to be paid, it is just that the payment of that rent is being deferred for an agreed period of time.
The Landlord is effectively agreeing with the Tenant that they do not have to pay the rent for a set period of time.
Rent Payment Plan
This may be an agreement between the parties, that could be a mixture of the two options above, or a third alternative.
Rent Reduction Plan
This may be an agreement between the parties, where there is a reduction in rent for an agreed period of time.
Whatever the parties agree, it is advisable to record this in writing and always check the Tenancy Agreement before entering into negotiations, so that you know your fullback legal position.
Other points that are worth considering from a Landlord’s perspective are whether or not the Lease makes provision (and the Landlord wishes) to charge interest, whether there are any individual guarantors to the Agreement, who could be relied upon to make up some of the rent shortfall and when the end date of any Lease or Letting Agreement may be.
In summary, the key message is for the parties to continually communicate. Depending on the property involved, it may be better to have an occupier in there paying a reduced rent, rather than having an empty unit with no rent and the potential for an empty rates bill in the future. Anything that you agree with your Landlord or Tenant should be put in writing and make sure you have done your homework before entering into discussions.
Finally, remember that recent Government legislation has prevent Landlords from evicting Tenants for non-payment of rent until the 30th June 2020 and any arrangements that you come to need to bear in mind that you must not discriminate on the usual grounds.
The Brooks Leney are assisting a number of clients in these types of discussions and would be pleased to help in any Landlord or Tenant issues you may have. Our Meet the Team page can be found here.