COVID-19 & Advice for Commercial Landlords
The measures ordered by the government to tackle the COVID-19 pandemic are far-reaching and are having dramatic effects on all individuals and businesses up and down the country. As a landlord of a commercial property, how can you expect to be affected by these?
Do you have any questions about commercial property? Contact us today.
Points to be covered in this article
Dealing with requests for rent concessions
Some tenants will be struggling with forced closures of their premises and sharp reductions in their turnover. If your tenant is affected in the same way, this may result in a request for help from you with their obligations under the lease. You may be asked to waive a rent payment, or defer it. Perhaps they would like you to discount the rent or change the frequency of payments from quarterly to monthly.
You are not obliged to agree to any such request from a tenant and you may have your own financial obligations which you need the rental income to satisfy. If you do have some flexibility here, you might want to weigh up the impact on your rental income against the benefits of a good relationship with your tenant and having an occupied property once the pandemic is over.
If you are able to agree some form of concession with your tenant, framing it within a side letter to the lease will mean it does not vary the terms of the lease but takes the form of a personal agreement between you and the tenant. It is important that side letters are drafted carefully so that they take effect in the way you intend, so please get in touch and ask us to help you through this.
Obligations in relation to multi-let buildings and common parts
If you own a multi-let building or an estate on which there are common parts over which you retain responsibility, it is likely that you will be required to comply with the laws that apply to the common parts. You will need to make sure that you follow the government guidelines in relation to COVID-19 insofar as they relate to the building or estate that you own. If you incur additional costs providing deep cleans or hand sanitizer, for example, then you should be able to recover the extra costs via the service charge but this will depend on the wording of the lease.
If you are obliged to close down a building to prevent the spread of the virus within the common parts or in order to comply with government guidance but one of your tenants is not choosing to close then you may be liable for a claim of damages for derogation of grant or breach of the tenant’s quiet enjoyment clause and the claim could include a claim for loss of profits.
If the government restrictions mean that you are unable to provide some of the services that you are required to provide under the terms of the lease, for instance due to problems in the supply chain or as a result of lack of materials, then you may be in breach of your obligations to the tenant. Similarly, this may be the case if staff shortages mean that the manging agents you have engaged are unable to carry out all of their duties in managing the building or the estate.
Dealing with enforcement of the lease terms
If your tenant is in breach of its obligations under the terms of the lease, what can you do? The government has introduced, as part of the Coronavirus Act 2020, a moratorium on forfeiture or taking back possession of a commercial property when the tenant has failed to pay any of the sums due under the lease.
If your tenant is in arrears there may be other remedies that you can pursue. If you are holding a rent deposit then, subject to the terms of the rent deposit deed, you may be able to recover the amount of any arrears from the deposit. If the tenant has a personal guarantor then you may be able to pursue them for payment. Also, you may be able to petition to have the tenant made bankrupt or wound up.
Before taking any action against the tenant during this pandemic, you may want to weigh up the benefit of taking any action against the benefit of delaying action in order to maintain a good relationship with your tenant and keep your property occupied in the longer term.