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Commercial Lease Landlords

Thursday, 9 April 2020

Commercial Lease Landlords

Commercial landlords are becoming increasingly concerned about the COVID-19 lockdown having continued impact on their properties. Firstly, we wish to reassure all commercial landlords that although not visible, we are still working in the best interests of all of our clients and will continue to offer the highest possible level of service, from our home offices. Our office phones are being diverted and will be answered by someone within the Howkins & Harrison team, who will get a message to the appropriate person and we will call you back as soon as possible.

We have had a significant upturn in calls from commercial landlords in relation to their commercial leases, so have summarised several the most frequently asked questions below.

What is force majeure and can it be brought to action?

A force majeure event refers to the occurrence of an event outside the reasonable control of a party which prevents that party from performing the obligations of its contract. Most commercial property leases do not contain force majeure clauses which entitle either party to end the lease. Instead, it may be plausible for tenants to look to the doctrine of frustration if they are unable to occupy their premises, which could lead to a discussion about lease obligations. There is no legal president in the UK for frustration to be used as an end of contract and therefore in the case of COVID-19, it is unlikely that a tenant would be able to argue that a lease is frustrated as the period of non-occupation is temporary. Instead, we would signpost tenants towards Government financial support for businesses.

Can the tenant withhold rent?

Leases are unlikely to allow tenants to withhold rent, irrespective of the circumstances. In normal times, this would potentially lead to forfeiture, where a commercial landlord would be allowed to re-enter the premises and take possession by changing the locks. However, The Coronavirus Act 2020 which became law on the 25th March 2020 has suspended all rights of the commercial landlord to take forfeiture action, so that tenants who can not afford to pay their rent will be protected from forfeiture if they miss a payment in the next three months (ending June 30th 2020).

This period can be extended by the Government, depending on how the situation plays out in the coming weeks. Chancellor Rishi Sunak assures all commercial landlords that the UK Government is actively monitoring the impact on commercial landlords’ cashflow and are urging banks to support all businesses with mortgage holidays and other short-term options.

Rent Concessions

A number of tenants are approaching their commercial landlords to agree a mutually appropriate short-term solution to share the risk and continue the longer-term success of their business. If you require support for these situations, please contact David Grove (david.grove@howkindandharrison.co.uk) or Tori Whinder (tori.whinder@howkinsandharrison.co.uk) who will be able to help or advise. Agreed terms on extending the length of the tenancy or re-paying the concession amount over a set period should be completed fully and agreed in writing by both parties. Please do ask for our advice in the legal standing of any alterations to your lease.

Keep-Open Clauses

Most leases for retail and other uses will contain a keep-open clause. However, there should also be an obligation on the tenant to comply with statute. In the case of the Government lock-down forcing non-essential retail outlets and licenced premises to close their doors, tenants would be in a breech of this covenant if they were to stay open, so such clauses should not cause concern to either commercial landlord or tenant.

Restaurants & Pubs turning to Take-Away Outlets

If your premises usually trades as a restaurant or pub, please contact one of the commercial team before changing use to a take-away outlet. A new permitted development right has been introduced to support such businesses through the temporary period, running from the 24th March 2020 until 23rd March 2021, but a number of requirements are involved which we can support you through.

Deep Cleaning

Commercial landlords responsible for communal areas of a premises should employ a deep clean as soon as feasibly possible. If the lease includes a service charge, the commercial landlord should be able to cover the cleaning costs from within that provision as part of ‘good estate management’. Tenants are responsible for deep cleaning their own areas of the building or buildings.

Contact Us

Although we aren’t visible within our usual working environments, we are still here, fully operational and working from home. We have complete access to our usual systems, are continuing to promote properties and support all clients. Please call either the Rugby (01788 564 678) or Ashby (01530 877977 option 2) offices and leave your details with our team member. Your information will be passed to the person most able to support your needs.

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