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Essential facts for commercial landlords and tenants during COVID-19

The Coronavirus lockdown is an uncertain time for commercial landlords and their tenants. In this article, we’ll take a look at where both parties stand legally. Let’s find out more.

The COVID-19 crisis is a challenging and stressful time for business owners and the landlords that own their premises. Tenants may have seen their businesses forced to close for the period, or have seen their demand decimated. Paying their rents will be much more difficult than usual and they may be worried about eviction. On the other hand, landlords still need to collect their rents, while filling a vacant space will be harder than ever.

In this article, we will look at the situation from a legal standpoint. We’ll look at how the Government has changed the law around commercial property, the options for landlords and how tenants can find help at this uncertain time.

New legal situation

The Government appreciates the problem that commercial tenants are facing at the moment. In the Coronavirus Act, passed in March, it set out some measures to ease the pressure on tenants:

  • Landlords cannot exercise forfeiture of a tenancy because a tenant has not paid rent, until the end of this period. (The period currently ends on June 30th, but may be extended by the Government.)

  • Landlords may not exercise the right of re-entry to the property for non-payment, until the end of the period.

  • For ongoing litigation cases for forfeiture due to non-payment of rent, landlords may not evict their tenants until the end of the period.

  • Landlords may not treat non-payment during this period as a determined attempt not to pay rent or deliberate delay of payment.

There are also other measures designed to ease cash flow concerns for businesses, such as the delay in VAT payments.

However, the Government stopped short of allowing tenants not to pay their rents during this period. Rents are still due and landlords have no obligation to offer any kind of relief to their tenants. Ideally, during this challenging time, we hope both sides will communicate transparently with each other and common sense will prevail.

Options for landlords

The dilemma for landlords is how to deal with tenants struggling to pay rent during the COVID-19 crisis. If a tenant cannot pay, do they pursue them aggressively, knowing that even if they can eventually evict them, it could be harder than ever to re-let the space? In the current climate, it may make more sense to come to an agreement with the tenant which satisfies both sides. For example:

  • Waiving the rent for a temporary period

  • Deferring the rent until after the crisis has eased, with a staggered schedule for the tenant to pay back the full amount back

  • Changing to monthly rather than quarterly rents to facilitate cash flow

Landlords must consider how valuable their client is to their wider portfolio. What would be the consequences if the tenant went out of business?

Options for tenants

With transparency and good communication, tenants may be able to work out a deal with their landlords which keeps them in their premises. However, if they cannot reach an agreement, tenants may have little room to manoeuvre. To restate – the landlord is under no obligation to waive or defer rent.

If tenants are struggling because of the COVID-19 crisis, they should research the financial help that the Government has made available. They should also talk to their insurance company about whether their policy offers coverage for pandemic situations. Borrowing to pay your rent should be your last resort.

Find out more from Couchman Hanson

If you are commercial landlord unsure of how to deal with a tenant who is struggling to pay rent, or if you are a tenant searching for legal advice at this difficult time, it’s time to talk to Couchman Hanson.

At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.

Call 01428 722189 or email enquiries@couchmanhanson.co.uk

Daniel Couchman