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COVID 19 - what does it mean for commercial tenants?

View profile for Jenny Colvin
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On 23 March 2020, the Government announced a lockdown for the United Kingdom in order to fight the outbreak of coronavirus. This meant that hundreds of thousands of businesses, large and small, were forced to close their doors to both their staff and the public, having a huge impact on their finances. Jenny Colvin, Partner in our Commercial Property team, looks at what this means for tenants in commercial premises in the coming months.

My business is closed – do I have to pay the rent on my business premises?

Your rent is still payable under the terms of your lease, unless you have expressly agreed anything to the contrary with your landlord. If you are struggling financially, it may be worth having the conversation with your landlord sooner rather than later to see what they are prepared to offer you to assist in this difficult time. Bear in mind though that they don’t help you; it is at their discretion as many landlords are also struggling with their own cashflow from their tenants not paying the rent. If you do agree anything outside of the lease terms though, ensure it is made clear what you are to pay when and when, and follow it up in writing.

Can my landlord kick me out?

In all commercial leases, there will be a clause allowing your landlord to re-enter the property, effectively ending your lease, in the event that you breach the lease terms. Current Government legislation prohibits your landlord exercising this right to forfeit the lease for non-payment of the rent before 30 September 2020, therefore you cannot be evicted until 1 October 2020 at the earliest. This period may be extended by the Government. This is not a rent free period though, but a deferment of your debt. You should budget accordingly and be prepared to have to pay the balance after this period, as soon as possible. Please note that the landlord can still take action for other breaches of the lease, such as carrying out alterations without consent or not keeping it in repair.

My landlord is threatening to sue me. What can I do?

Forfeiture is not the only remedy available to a commercial landlord; it is just a means of their recovering the property from a non-paying tenant. Your lease is a contract and failing to pay the rent will constitute a breach of contract. The landlord can therefore take legal action against you, which could include suing for their losses, or even making you insolvent. For rental arrears, they can also use the CRAR method of seizing your goods to the sum of the debt due. However, since 26 June 2020, the Government has extended the existing additional measures to prevent landlords from issuing statutory demands until after 30 September 2020. CRAR can also now only be used where the rent is overdue for more than 189 days. This does not prevent the landlord from taking any of these measures should the rent still remain unpaid after 30 September 2020.

What if I still can’t pay the rent when lockdown is lifted?

Whilst legally you are still obliged to pay everything to your landlord that is owed from before, during and after lockdown, communication is likely to be the most effective means of resolution. Your landlord may be willing to discuss a payment plan or a deferment of the rent. It is, though, again, entirely at their discretion. Make sure that any arrangement for a reduced or deferred rent is documented in writing as evidence of what you have agreed. We can assist with this if need be.

If you are having to make a difficult decision to move out or close your business completely, there may be other means of getting out of your lease obligations via the use of a break clause (if any), assigning the lease or agreeing a surrender.

Our offices are not currently open for face to face appointments, however we are working remotely and are able to answer your concerns.  If you are a tenant worried about your commercial lease, you contact Jenny Colvin by calling 023 9277 6558 or emailing jennycolvin@warnergoodman.co.uk

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.