Leases in Lockdown: Covid-19 and Business Tenancies

Business Tenants struggling to meet rent and other lease costs are increasingly reaching creative agreements with their Landlords to reduce or suspend rent payments or draw down rent deposits.

Meanwhile Landlords are facing increasing numbers of Tenants with cashflow difficulties, and consequential problems collecting rent. A proactive approach is best and there are still multiple options – especially critical where a landlord is competing with other creditors for priority.

The Coronavirus Act 2020

The Coronavirus Act 2020 prevents the eviction of certain commercial tenants before 30 June, 2020, with a proviso that the end date could be extended.

There are some key points to note: –

  • The actual liability for rent (plus service charges, insurance etc.) is not affected by the Act. It still remains payable in full. The Landlord can still pursue unpaid rent immediately by other means;
  • Even the right to evict a Tenant is not waived but just delayed, unless the Landlord agrees to waive the right to evict altogether in writing;
  • Leases with a term of less than 6 months do not have the protection of the Act, nor do other tenancies such as a tenancy at will.

Practical steps for Tenants in financial difficulties to consider

  • Negotiate concessions with your Landlord, such as: –
    • a temporary rent deferral or reduction;
    • a permanent rent concession with the lease term extended;
    • agreeing a realistic schedule for repayment of any arrears;
    • drawing down against a rent deposit.
  • Check whether your building insurance provides cover if you are unable to trade – though the majority of business interruption policies are unlikely to extend to pandemic.
  • Take special care if your lease contains a break clause, especially if that is imminent. Many of these are voided if the Tenant is in breach of the lease, for instance if rent payments have been missed without the Landlord’s agreement.

Many Landlords will be receptive to reasonable proposals to vary terms, particularly where the alternative is the risk of losing a Tenant and having a vacant property.

Contact Denise Hedley for advice on the above lease issues on 0121 325 5406 dh@coxcooper.co.uk

For COVID-19 employment advice, contact David Cooper 0121 325 5402 dmc@coxcooper.co.uk or Andrew Cox 0121 325 5403 abc@coxcooper.co.uk

We are still operating as normally as practicable in the circumstances and continuing to respond to e-mails and phone calls, without currently conducting face-to-face meetings.

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