The period of uncertainty and significant financial hardship will have a huge impact for landlords of commercial premises and the commercial property market generally.
See our article about this and how to deal with requests and non-payment of commercial rents.
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’. New legislation is proposed which will include a moratorium for company which they seek a rescue or restructure and a temporary suspension of the wrongful trading provisions retrospectively from 1 March 2020 for three months.
Landlords of shopping centres may be considering whether they can close the centre completely. Such action might leave them in breach of non-derogate from grant or quiet enjoyment covenants or claims for repudiatory breach.
From a tenant’s perspective, 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. Applications for injunctive relief are likely to fail, leaving the landlord with a claim for damages. Tenants will likely have covenanted to comply with any statute, notices or orders made by a competent authority which will cover any government requirements to close non-essential shops, restaurants and bars.
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
Landlords must still comply with their obligations under the leases including the provision of services, although some services will be rendered unnecessary such as providing reception or security staff. Cleaning requirements may be reduced, but in some cases enhanced cleaning might be required.
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. Difficulties may be encountered if a tenant is unable to deliver up vacant possession because of the lockdown.
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.
Please contact Rachel Sims for more information on 01223 532730 or click here
to email Rachel.