Dan Boulton and Chloe Harrison, from Harrison Drury’s commercial property team, offer some practical steps for commercial landlords to consider in order to protect their interests during the coronavirus pandemic.
The coronavirus COVID-19 pandemic and the constantly changing guidance and policies issued by the government, has caused the commercial property market to shift into unprecedented times.
Since the rise of the pandemic, the government lockdown and forced closure of many businesses, Harrison Drury has received a significant increase in enquiries from both landlords and tenants trying to understand their legal and contractual obligations.
Technical legal arguments, such as Frustration and Force Majeure, may be considered and deployed in these circumstances but are subject to the contents of the lease agreement. Due to the ever-changing landscape during this crisis, parties should in the first instance consider more practical solutions to preserve landlord and tenant relationships.
The current legal position for landlords and tenants
With further updates expected from the government during the course of the crisis, here are the present key points for commercial landlords and tenants to take into consideration:
- Currently, there is no legal right for a tenant to refuse to pay rent during this time.
- The government has brought in legislation to the effect that a landlord is not currently allowed to forfeit a tenant’s lease for non-payment of rent.
- Although a landlord can still presently serve a statutory demand, the court is not hearing winding up petitions. If a landlord wishes to take measures using this procedure, they must be aware that there will likely be a delay to further proceedings.
- While Commercial Rent Arrears Recovery procedures are still available, bailiffs are unlikely to enter buildings that may be deemed unsafe due to present social distancing measures.
- There are no blanket freezes on court proceedings at present for non-payment of rent, but logistically it is likely to take many months before a court judgment could be enforceable.
What can I do to ensure my tenants stay in my premises?
To maintain a tenants’ continued occupancy, landlords have generally been willing to alleviate rent pressures for tenants during this difficult time.
There is a range of solutions a landlord may wish to consider to preserve good relations with its tenants. Whether offering a complete waiver of the rent, rent deferrals*, rent suspension or rent reduction for a specified period of time, the benefit of accommodating these allowances and retaining the tenants’ occupancy will hopefully protect the long-term interests of both parties.
Any steps taken to retain occupancy, and the reasons why, can also be reflected in any application for the Coronavirus Business Interruption Loan Scheme (CBILS) or local authority business grants which you or your tenant may be applying for during this time.
*Our property team has developed a simple self-service tool to help landlords create cost effective rent deferral agreements instantly. Click the link to find out more: Create a Rent Deferral Agreement
Will my business insurance cover me as a landlord?
If you are a landlord, we recommend you check your commercial property’s insurance policy to determine what your position is regarding business interruption cover due to the coronavirus pandemic.
The ever-changing landscape for businesses
As alluded previously in this article, the guidance issued by the government regarding business support and protection during this crisis is updated on a regular basis. Therefore, the above guidance is subject to change. We strongly recommend that specialist advice is sought before making any proposed changes to your commercial property lease agreements to ensure your interests are best protected.
To discuss your commercial property lease or landlord and tenant relations, or for general enquiries regarding your property, please contact our commercial property team on 01772 258321.