Coronavirus: A summary for Commercial Landlords

Given the COVID-19 situation, commercial landlords are increasingly receiving requests for assistance from the tenants of commercial premises or simply not receiving rent and other sums due pursuant to commercial leases.

It is advisable for landlords to adopt a proactive approach in clarifying their position to their tenants in such circumstances.

Factors to consider

When weighing up how best to proceed there will be a number of factors that landlords should take into account including:

• the moratorium on forfeiture initially until 30 June 2020 for non-payment of rent introduced by the Coronavirus Act 2020
• whether any security is held by the landlord in respect of the tenant’s obligations including personal guarantees or rent deposits and tactically if and when to enforce such additional security
• the availability of and utilisation by the tenant of other assistance provided by the government or business interruption insurance
• whether the landlord could potentially become liable for empty property business rates should the tenant vacate
• ensuring that the tenant is genuinely experiencing hardship and not simply trying to capitalise on the situation.

Options available

There are a multitude of options available to landlords including:

• making it clear to tenants that they expect them to fulfil their obligations pursuant to the lease regardless of the current situation
• providing for rent to be paid monthly rather than quarterly in order to assist with cash flow
• agreeing to defer the payment of rent (whether or not to a fixed later date or for payment pursuant to an instalment plan)
• agreeing to discount rent or other sums due pursuant to the lease
• agreeing to a rent-free period.

How a landlord decides to proceed is a matter for commercial negotiation which agents will be able to assist with where appointed.

Whichever course a landlord determines to take it is essential that this is recorded in writing, usually by way of a side letter.

Side Letters

We recommend that professional legal advice is sought in connection with entry into any side letters to leases.  This will ensure that there is no scope for confusion as to what has been agreed and also give commercial landlords comfort that such agreements are legally enforceable if this becomes necessary.

Further information

Ashtons Legal provides specialist assistance to landlords to ensure that in these negotiations landlords do not concede or prejudice their position unintentionally.

If you or your business require advice for any commercial property matters, please get in touch with our specialist Commercial Property team through this website or by calling 0330 404 0778.

This information is correct at 4.00pm on 2 April 2020.