Whether you are a commercial tenant or landlord, the current COVID-19 pandemic has brought unprecedented challenges to businesses. Callum Hall and Ashley Chambers from local solicitors Wiseman Lee report
This article will provide general advice to both commercial tenants and landlords on the Coronavirus Act 2020, developed by the UK Government in response to the pandemic and the effect this has had on commercial leases.
The main issue for many tenants is affording to pay rent on a commercial property which is forced to shut and not generating any income. The act, which came in to force on 25 March, provides commercial tenants with protection from eviction on grounds of non-payment of rent until 30 June (which can be extended by the government). Under the act, rent includes any sum which a tenant is liable to pay under the lease, so it includes service charges and insurance premiums. The protection applies whether the tenant’s failure to pay rent is caused by COVID-19 or for any other reason.
Commercial tenants are therefore able to avoid paying rent for the March quarter until the end of June, without the landlord issuing forfeiture proceedings. In addition, when it comes to renewing the lease at the expiry of the term, the landlord cannot refuse to grant a new lease on grounds of failure to pay rent, where the failure to pay relates to the protected time period above.
Many landlords and tenants are having conversations and reaching agreements about quarter payments which are due in June and September, but it is recognised that businesses may struggle with cash flow due to COVID-19. A solicitor can negotiate directly with a landlord on behalf of a tenant for rental holidays or concessions.
As mentioned, the moratorium on possession and statutory demand claims will cease on 30 June (if not extended). This does not preclude any contractual interest which is due or any monetary claims. The next quarters’ rent is due on 24 June.
Landlords should think commercially on their next steps. Forfeiture may not be their best route if debt is owed. If a lease is forfeited, no future rent payments can be collected. So, it is wiser to help the tenant through the current crisis. Landlords should speak to their tenant, understand their business and what they are capable of paying.
Landlords could also offer a deferred payment. Remembering it is in their best interests to keep their current tenant solvent. If the tenant goes bust, then they will have an empty property and most likely have to go through the insolvency process, where they are unlikely to receive the whole amount of any sums owed.
Landlords will also need to assess how quickly they can remarket their property and get a new tenant in.
