Business Leases and the ImpacT of Covid-19
Recent events due to coronavirus and the Covid-19 restrictions have greatly impacted the business and commercial world and raise important questions for both landlords and tenants of commercial premises.
Ultimately, each case will depend on the terms of the lease and legal advice should be sought on any specific question, but we set out below some general aspects to consider, regardless of whether you are a landlord or a tenant that may help in these difficult times:
Suspension of Lease Obligations and Force Majeure
A force majeure is a legal phrase to describe the happening of an event outside the control of the parties to an agreement, such as a natural disaster.
Standard lease precedents generally do not contain provisions allowing for the suspension of the lease obligations or to end the lease due to a force majeure circumstance. Consequently, it is likely that the lease obligations will continue to apply even in these Covid-19 times.
Rent Concessions
Standard lease precedents generally require a tenant to pay the rent quarterly. It is a matter of agreement whether the landlord is willing to relax that payment obligation to allow paying monthly.
Likewise, it will be a matter of agreement with the landlord whether to agree a reduced rent or a rent holiday and for how long, and whether the balance of the full rent otherwise due during that concessionary period is to be paid at a later date and if so over what period.
If a landlord and tenant agree to vary the rent payment obligations in any way, that agreement should be recorded in writing and is usually done by way of a side-letter, rather than as a deed of variation to the lease. We can prepare a side-letter for your use, please email pshelcott@mslaw.co.uk for more information.
Unable to Pay the Rent as and When Due
The Covid-19 restrictions may impact on the finances of the tenant and cash flow. Consequently, a tenant might not be able to pay the rent as and when due.
Standard lease precedents usually contain a forfeiture clause that allows a landlord to re-take possession and bring the lease to an end or to seek an order for possession to evict a tenant due to non-payment of rent.
Section 82 Coronavirus Act 2020 blocks a landlord from effecting forfeiture or from enforcing an order for possession until 30 June 2020 – the relevant period under the Act. The Act provided for that date to be extended by the Government. The Act provides only in effect a stay period of the consequences of non-payment of rent, not a relief from paying the rent. A tenant who is concerned about the ability to pay rent should contact their landlord and ask for a rent holiday, reduced rent or to pay monthly, but it will be for the landlord to agree. We may be able to assist in those discussions, whether you are a landlord or a tenant, should you need help.
Further Advice
If you wish for further advice on your specific lease or property query, do to get in touch with Philip Shelcott via email, pshelcott@mslaw.co.uk, so that we can discuss how we can help you further.
