COVID-19 and Commercial Leases

The uncertainty and economic upheaval created by COVID-19 is putting many businesses into a very ambiguous position and is having a huge impact on landlords of commercial premises and the property market in general.

With retail and leisure operators having been ordered to close, many landlords and tenants are already in communication and reaching arrangements about rental payments.

The Government recently announced emergency measures have been put in place to protect residential tenants and this has now been extended to cover tenants in commercial properties.  These measures mean that if business tenants miss a rent payment up until 30th June, Landlord’s cannot take action to forfeit the lease.  It also applies to ongoing forfeiture proceedings which will be frozen until the end of June.  It is important to note that the suspension is only for the failure to pay rent and not for other breaches of covenant, other avenues available to Landlord’s have not been interfered with.

We are still waiting for further clarification, however, at the moment it looks as though tenants do not have to prove their inability to pay rent is as a direct result of COVID-19.  This could have devastating consequences if tenants choose to withhold rent for the next 3 months and landlords are unable commence legal action.

Landlords need to seek advice now and have a formal agreement drawn up ensuring deferred rent payments are repaid and that the temporary suspension doesn’t constitute a variation of the terms of the Lease.

For help and advice contact Commercial Property Solicitor, Gillian Hindle on 01204 527777 or  Correct as at 25th March 2020.