COVID-19 – Commercial Leases: Common Q&A

My tenant has suggested they won’t be making the next instalment of rent due, can they choose to withhold this? Generally the answer is no … most modern leases prohibit a tenant from withholding rent and whilst at present a landlord’s right to forfeit is currently restricted there are other options available to a landlord if the rent payments are not received. Tenants who are struggling to meet the rent demands should speak with their landlords and seek to agree a rent concession (reduction, deferral or suspension) in order to avoid a landlord taking formal action against the tenant for unpaid rent. Any agreement reached needs to be formally documented in order to be relied upon.

Who will be responsible for costs associated with a deep clean? The answer to this will depend on your individual situations but as a general rule if you lease a stand alone property and by stand alone I mean not part of a larger building or shopping centre then the tenant will be the responsible party for any required deep cleaning that needs carrying out. If the property is part of a larger building or centre whilst the tenant would be responsible for their own individual area as demised by the lease the landlord would likely be responsible for the common parts and so this area would fall under the landlord’s or management company’s responsibility to be deep cleaned. However if this is the case the tenant would usually be paying a service charge and dependant on the relevant clauses within the lease the landlord may be able to recover any costs associated with a deep clean through the service charge.

Is a tenant entitled to a rent suspension / reduction? The tenant isn’t entitled to any rent suspension or reduction due to the implications of COVID-19. It is a matter of negotiation and whilst we are seeing requests being made by tenants and some landlords agreeing there is no obligation on a landlord to agree to any rent concession. The majority of modern leases also state that rent is to be paid without reduction or set off so if anything is agreed to the contrary it needs to formally documented to be relied upon.

Can a force majeure clause within a lease be relied on to bring an end to the lease due to COVID-19 and if not, would the common law principles of the doctrine of frustration allow termination? It is always worth checking your specific lease terms but it isn’t common to find a force majeure clause within a commercial lease. These clauses are more commonly found in construction contracts or development agreements. However, if your lease does have this type of clause within it then it will depend on the specific terminology of the clause as to whether COVID-19 is covered. Even if COVID-19 is covered, both force majeure clauses and especially the doctrine of frustration have a high bar to meet in order to be relied upon. It is unlikely a temporary short suspension on being able to operate from a property will satisfy these provisions when leases usually run for a number of years.

The only likely ways a tenant can bring the lease to an end would be by

  • a. it coming to the end of the stipulated term;
  • b. through negotiating a surrender with the landlord; or
  • c. via the exercise of a break option if the lease contains one.

Can a landlord stop a tenant from using the property due to COVID-19? Another standard provision in the majority of leases is the tenant’s right to quiet enjoyment of the property. COVID-19 doesn’t restrict this right so the landlord cannot prevent a tenant from occupying the premises they lease. However if the property leased is part of a larger building (i.e. office space within a building which leases to a number of tenants) then you will commonly find within the lease the landlords ability to set reasonable management regulations and limit services available, such as restricting lift access to ensure social distancing.

The above answers have been produced based on the usual clauses and common circumstances in the majority of modern leases. Should you require specific advice regarding your own circumstances then please get in touch.