The UK government last night (23/03/2020) introduced measures to be included in the emergency Coronavirus Bill currently going through Parliament.
The bill is to ensure that commercial tenants who cannot pay their rent because of this pandemic will not be evicted for at least three months. Commercial tenants will still be liable for the rent after that period. The government is also “actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them”. Many commercial landlords are already setting a great example by working closely with tenants and offering rent deferrals or holidays. Communication with their landlords is key for occupiers at this time.
Here are some things to do:
- Keep detailed records about how this global coronavirus emergency is affecting you and your business on a day by day basis. Specifically, with regard to property, you should record operational issues such as closing times, dates of different government actions and their impact, loss of trade, implications on staff, employees, customers, suppliers etc. etc.
- Check your lease for a force majeure clause or a rent suspension provision. If there are none then the rent will generally be legally payable in accordance with the lease unless the Landlord agrees otherwise. Landlord remedies for non-payment of rent include statutory demand, issuing proceedings or CRAR. Forfeiture for non-payment of rent is off the table for the time being following last night’s announcement. HOWEVER, landlords have moral and ethical considerations, and those taking a strict legal stance against tenants that can’t pay the rent during this difficult time may come under public pressure.
- Check your lease for keep open clauses, break options and whether conditions apply to any tenant option to break. Establish when your lease expiry date is and consider implications on notices.
- Communicate often with your landlord and act fairly and reasonably.
- Communicate with other occupiers that share the same landlord and find out what they are doing. Consider whether a joint approach is advisable.
- Keep a detailed written record of all contact, conversations and correspondence with your landlord in case of a dispute.
- Contact the Landlord and tell them specifically what you need to get you through this period. You might need a:
- Rent deferral or holiday with the rent being paid back over a set period of time say two years.
- Part rental payment for a specific period.
- Rent free period with no payback.
- Rent reduction to next lease event.
- When asking for help with the rent, consider asking for this for an initial period (however long you feel you can reasonably justify) to be reviewed at the end of that period. This way you avoid tying yourself into a set timescale which may not be long enough to keep your business sustainable. Landlords generally want to retain good tenants and will be concerned about downward market rental movement on any reletting, void periods and empty properties.
- Tell your landlord what you intend to do in return for their co-operation, even if it is just saying that you will keep the business solvent and start trading again as soon as it is safe to do so. Do you intend to make up any rental shortfall at a later date? Will you agree to add it on to the end of your lease? Are you looking for the landlord to simply forgo rent for a period of time? What you ask for will depend on your own business and its specific situation. What the landlord is able and prepared to do to help you will depend on the landlord’s position.
- With the above in mind, consider your landlords needs and their situation during and after the coronavirus when deciding exactly what to ask for. Many Landlords have loans and need to pay their lenders. Is your landlord getting help from their bank or the government? Has this been in the press or have you heard from other occupiers that they are getting help? Government may start encouraging leading banks to provide payment holidays for particularly affected landlords and so this situation is fluid.
- Consider your landlords position and what might work for them. Is your landlord a private individual that relies on cash income from rent each month to pay their own bills or are they a property company with high levels of borrowing or are they a local authority or pension fund facing shortfalls?
- Consider an open book policy with the landlord showing all your sales/costs and how this coronavirus pandemic and government shutdown is affecting your business. Ask them to do the same.
- Consider whether a lease re-gear is an appropriate option at this time and ask for outstanding rent reviews to be settled at a Nil increase.
- Ensure that you don’t pay your local authority inadvertently by standing order or direct debit if your property is in the retail, hospitality and leisure sectors regardless of rateable value because business rates discount is 100% for 2020/2021.
- Ensure that any agreement with your landlord is appropriately documented and seek your own commercial property legal advice in advance of finalising/agreeing.
- Check all insurance policies and with your Insurance advisor for business interruption cover. If premises are closed, ensure insurers’ requirements for empty premises are complied with.
- Know your options when it comes to Insolvency and speak to a licenced insolvency practictioner for advice if you think that this may be an option for you.