The impact of Coronavirus on commercial leases: Landlords and Tenants need to know

Aston

24 August, 2021

The impact of Coronavirus on Commercial Leases: What Landlords and Tenants need to know on rental payments

Aston Brooke Solicitors is a reputable law firm based in Harrow, Middlesex. We have been serving our valued customers for over a decade by providing high quality, bespoke legal services such as Conveyancing, Litigation, Immigration and Wills & Probate and more. In light of the current coronavirus outbreak, we are proud to be at the forefront of providing our customers with up to date news and advice on regulations regarding coronavirus. We will update our information regularly as per instructions from the Government.

The Government’s decision to impose a lockdown meant tenants occupying certain commercial premises would have had to close the doors to their business. This also meant Landlords would not be able to rely on rental incomes from their properties and as such, would have to put measures in place to ensure its continuance. On 23rd March 2020 the UK Government announced protections for commercial tenants. https://www.gov.uk/govern-ment/news/extra-protection-for-businesses-with-ban-on-evictions-for-commercial-tenants-who-miss-rent-payments

The new legislation (Coronavirus Act 2020) has the following effect on Commercial Leases:

The Landlord’s ability to take possession (forfeiture) of the property for Tenants who are unable to pay their rents has been suspended. As of 26 March 2020 no commercial Tenant can be forced from their business premises if they do not pay their rent. Existing possession orders have been suspended until after 30th June 2020 at the earliest, which is when the provision will be reviewed.

The suspension of rent cannot be considered a payment holiday and the Tenant will be liable for the entire rent at some stage regardless of their circumstances. It would therefore be wise for a Tenant to approach the Landlord for a payment plan to spread the rental arrears over the future period/Lease term.

Taking the above into account, the Landlord and Tenant can take some of the following practical steps to try and ensure that they are in the best position moving forward:

  • The Tenant may wish to re-negotiate a rent reduction for fixed period of time rather than take on a rent suspension. This will be entirely at the Landlord’s discretion.
  • The Landlord and Tenant may wish to review the insurance policy to see whether there is cover for loss of rent for business
  • Interruption for the current period and future. Any temporary arrangements to vary the rent must be documented by way of a side letter or a Deed of Variation (for a longer term) in order not to inadvertently vary the terms of the Lease.

It is unlikely that the current Coronavirus crisis and the recent change in the Government’s emphasis to Stay Alert, Control the Virus and Save Lives, will release the Landlord or the Tenant from their obligations. Hence it is vital that expert advice be sought and any legal actions are considered carefully.

Should you wish to discuss any of the above please do not hesitate to contact our property team on 0203 475 4321.

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