Commercial Rent – COVID19 Impact

The Coronavirus pandemic has caused widespread chaos across the world. Businesses worldwide have been forced to close their doors and while some businesses are starting to re-open in some form to generate cashflow many commercial tenants remain under strict lockdown procedures. The restrictions imposed by the Government have left many Tenants stretched when it comes to their rental payments, causing strain for commercial Landlords as a consequence of the lost rent income.

In the majority of commercial leases Landlords have the right to take back possession of their premises from a tenant who fails to pay their rent within a certain period of time, depending on the terms of the individual lease. However in these unprecedented times the Government, under Section 82 of the Coronavirus Act 2020, has in effect barred Landlords from implementing eviction provisions for non-payment of rent, making it unlawful until at least 30 June 2020, subject to possible extensions. This covers any sum that the Tenant is due to pay under the Lease.

The Government is also looking to implement further protections for commercial Tenants, potentially banning the use of winding up petitions and statutory orders for non-payment of rent and the use of enforcement agents, at least temporarily.
It should be noted that while these measures offer protection for Tenant’s struggling to meet their rent requirements it does not mean that their obligation to pay rent is removed. Landlords are still entitled to the rent due under the Lease during the Lockdown and that entitlement will not vanish.

Tenants should also be wary that non payment of rent could be considered grounds for a Landlord to refuse a renewal of the Lease under the Landlord and Tenant Act 1954.

Communication is key for both Landlord and Tenant. Tenants should be particularly careful in how they approach the Landlord to discuss the situation, although Landlords may not consider it commercially effective to try and remove the Tenant without the prospect of a new Tenant being available to take their place in the premises.

Discussions should remain as amicable as possible in an attempt to come to a resolution suitable for both parties to enable their relationship to continue as smoothly as possible, rather than a Tenant simply intimating to the Landlord that paying the rent is not possible in the circumstances.

Solutions could include changing rental payment dates from monthly to quarterly or agreeing a formal reduction in rent for a specified period. All agreements should be formally documented and drafted carefully. Both parties should seek legal advice.
The solution required will vary from Lease to Lease depending on the Tenant, the Landlord and the individual circumstances.

If you are a commercial Landlord or Tenant and are unsure of your rights and options during this unprecedented time please do not hesitate to contact Hall Smith Whittingham’s Commercial Department on 01270 610300 and we would be happy to assist you.