The Coronavirus pandemic is causing untold difficulties for businesses of all types. In order to attempt to help those businesses and the individuals who work for them, the Government has introduced various temporary measures. These include the ability for businesses to furlough employees while the Government pays them 80% of their wage; a ban on residential evictions and a potential mortgage payment holiday for those with a mortgage. This is alongside a pause on business rates for some businesses, as announced earlier this month.
But what about those businesses who rent their commercial premises? If they cannot trade, or at least trade at full capacity, what provisions have been made for their rent? The Government has now announced that commercial tenants that are unable to pay their rent as a result of Coronavirus will be protected from eviction.
No forfeiture / eviction
Most commercial leases include a power for a landlord to forfeit the lease if the tenant falls into rent arrears (or otherwise breaches the lease). The new Coronavirus Act 2020 prevents landlords forfeiting commercial leases for rent arrears until after 30 June 2020.
Do commercial tenants still have to pay their rent?
Yes. The terms of leases still apply. Rent payable on the March and June quarter days (or any other date until 30 June) is still payable. This is not a rental holiday for commercial tenants. It just means that commercial tenants cannot be evicted during this difficult time.
If a commercial tenant is struggling to meet rent obligations, it is best to speak to the landlord as soon as possible. Other rent arrears recovery options remain open to landlords.
Does the ban on evictions apply to other breaches of lease?
No, the ban on forfeiture only applies to non-payment of rent. If a commercial tenant has breached their lease by, for example, failing to keep the property in repair, the forfeiture route remains open to landlords.
Won’t a landlord waive their right to forfeit at some point during this period?
No. The legislation specifically deals with this point. Landlords cannot waive their right to forfeit leases for non-payment of rent during this period.
Must a commercial landlord consider a rent deferral or reduction?
This is a decision for each individual landlord, and they are not obliged to accept any such request. Landlords will need to weigh up the pros and cons of the tenant’s request. Between keeping tenants afloat and relations cordial, bearing in mind that the commercial tenant has likely been affected by coronavirus in some way; and the fact that the landlord will have less money coming in during what is likely to be a difficult time for all of us.
If a landlord and tenant make an agreement, must this be in writing?
If the landlord and tenant do agree to defer or reduce the rent temporarily, these must be carefully set out in writing by a solicitor. A deed of variation may be appropriate if the changes are permanent. Our commercial property team can advise you further on this.
The situation continues to evolve as the nature and the effects of the coronavirus pandemic develop. Indeed, the Government states that it is “actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them”. As a result, we will ensure that we keep our website updated with information and advice published by the Government.
At Levi Solicitors LLP, our commercial property disputes team can help you through these difficult times, whether you are a landlord or a tenant. For more information on how we can assist you, please call us on 0800 988 7756.
While our offices are currently closed, we are very much still open for business. Our solicitors are working from home to ensure that our clients continue to receive quality legal services when you need it most.