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20th March 2020

COVID-19 and Commercial Landlords

The period of uncertainty and significant financial hardship will have a huge impact for landlords of commercial premises and the commercial property market generally.
Tenants are likely to be approaching landlords to discuss the payment of rent. Requests for payment holidays and rent reductions are likely and where tenants pay their rent quarterly in advance, they may be asking to pay on a monthly basis. These matters should be carefully considered, and landlords should ensure that suitable agreements are put in place.

Administrations and liquidations are inevitable, as well as a number of CVA proposals. The landlord’s options should be considered carefully in every situation but in a difficult market there is usually merit in ‘keeping the lights on’.

Landlords are unlikely to want to forfeit leases where there is a risk of becoming liable for business rates. Unless a tenant has given up possession forfeiture should be considered very carefully given that courts are likely to have significant sympathy with any tenant who seeks relief from forfeiture.

Where premises have been left empty the landlord should be mindful of security issues and the requirements of insurers – see our separate article COVID-19 and empty premises.

Many leases, particularly of retail stores, will include ‘keep-open’ clauses. Any action by a landlord to enforce that obligation is likely to be looked on very unfavourably. The lease is likely to require tenants to comply with any statute, notices or orders made by a competent authority which will cover any government requirements to close shops, restaurants and bars.

Landlords must comply with their obligations under the leases including the provision of services. Those who provide any cleaning services and management of common parts should ensure that enhanced cleaning is carried out and refuse is disposed of in a suitable manner particularly where occupiers have suspected COVID-19 symptoms. The service charge provisions may or may not allow any extra costs to be recovered.

Where additional shared services are provided such as provision of reception or security staff, the lease should be checked carefully to see what the landlord is obliged to provide but obligations must always be balanced against the duties owed to employees, occupiers and visitors to any premises.

Over the coming months we are likely to see a number of tenants exercising break options and triggering lease renewals and rent reviews in a bid to take advantage of depressed market conditions.

There is clearly significant benefit for all landlords to work with their tenants to find ways to help their businesses survive during these difficult times. Hewitsons are happy to discuss all COVID-19 related matters and help you ensure that all matters are carefully considered and that all lease variations, agreements and concessions are appropriately documented. We can also advise you about your options when things go wrong or if you need to take steps to make sure lease terms are complied with.

For more information on any of the items raised in this article please contact Rachel Sims on 01223 532730 or click here to email Rachel.
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