The government have announced that commercial tenants who cannot pay their rent because of Coronavirus will be protected from eviction for the next three months.
With that in mind, many commercial tenants who have been worrying about whether they will be able to afford to pay their rent (given that tomorrow is the March quarter day) have breathed a sigh of relief.
However, since this protection only applies to eviction (and does not impact on the landlord’s other enforcement rights), that relief has been short-lived.
For that reason, many tenants have been having conversations with their landlords regarding temporary rent concessions. These include measures such as payment holidays or moving rent payments from quarterly to monthly.
Like tenants, landlords face their own challenges particularly in the face of immediately losing their rental income.
In recognition of the challenging times we are in and looking forwards to when this is all over, landlords and tenants will be looking to get their relationship back on a firmer footing. As a result, landlords are therefore being sympathetic to their tenants' requests for temporary rent concessions.
It is vitally important that where landlords are prepared to grant these concessions that they do not inadvertently cause themselves problems.
With that in mind, landlords need to make sure that whatever concession is agreed it is recorded in a letter.
The letter needs to make it clear that the concession is only temporary, and a period should be specified. It must be made clear that the lease is not being varied (to change the rent payment dates for the remainder of the term) and that the concession is personal to the current tenant.
The landlord needs to make sure that if there is a mortgage secured against the property, or if the landlord is themselves a tenant under a lease, that the concession will not result in them being in breach of their mortgage terms or their own lease.
If there is a guarantor under the lease, then the landlord should get the guarantor to also sign the concession letter (that way there is no argument that the concession freed the guarantor from their liabilities under the guarantee).
Depending on what is agreed in the concession, (or where no concession is agreed at all), landlords must remember that if they wish to pursue a former tenant or guarantor (under a pre-1996 lease), or a guarantor under an authorised guarantee agreement (or guarantee of an authorised guarantee agreement for post 1996 leases) to recover the unpaid rent, they must serve a notice under section 17 of the Landlord and Tenant (Covenants) Act 1995 within 6 months of the unpaid sum falling due. Failure to do this, will mean not being able to recover the rent from the former tenant or guarantor.
We can help advise on how to deal with specific landlord and tenants issues as they arise and properly document any temporary arrangements agreed with a tenant so as not to prejudice existing landlord's rights under a lease. For any queries you can reach us on our normal phone number 0161 941 4000 or via email. We have made a complete transition to a fully functioning remote office and it is business as usual.