Landlords, Commercial Leases and COVID-19

As the Coronavirus pandemic continues and many businesses enter into ‘lockdown’ - forced to shut as part of the Governments initiatives to inhibit the spread of the virus - commercial property landlords and tenants are attempting to navigate challenges and uncertainty; equally increasingly concerned about how the outbreak is likely to impact on their business and cashflow.
At Prop-Search, we are already processing enquiries on behalf of landlords in relation to commercial leases and their position with regard to tenants and rent payments.  Whilst many landlords and tenants have, or are in the process of having, conversations and reaching voluntary arrangements, it has been recognised by Government that businesses - particularly many retailers which have been forcibly closed as non-essential businesses - may struggle with their cashflow and as a result will be unable to pay their rent.
To guide both landlords and commercial tenants through these unchartered waters, the Government has issued extra protection for businesses with a ban on evictions for those that are unable to pay their rent or come to an agreement.  Legislation is now being put to Parliament which means that no business will be forced out of their premises if they miss a rent payment in the next three months.
Simon Toseland, a Director of the commercial property agency, Prop-Search, said: “This announcement by Government gives clarity to the situation but tenants need to remember that they are not being released from the obligations of their leases.  Furthermore, the rent ‘holiday’ excludes service charges, insurance ansd obviously utilities and any rates liability.  Equally, they are not able to determine their lease early due to the Coronavirus outbreak.”
He added: “A tenant can only bring a lease to an early end if they have a break option to terminate the lease.  Whilst a tenant may argue that the current pandemic amounts to an event which is outside of the reasonable control of a party and prevents them from performing their obligations under a contract, this is not a commonly found clause within a modern commercial lease.”
The Government has also announced that it is monitoring the impact on commercial landlords cashflow and mortgage obligations.
More detailed advice can be obtained from Prop-Search – Telephone: 01933 223300 / 01604 492000 or its website – www.prop-search.com