Practical Steps for UK Commercial Tenants During Covid-19
Even at the best of times, commercial property relationships between landlord and tenant is fraught with technicalities and difficulties. The pressure now placed on various sectors of the UK economy as well as globally is unlike anything we have witnessed in modern times; with a great strain being placed on commercial properties where both tenant and landlord are finding themselves in very difficult and sometimes dire situations resulting from the impact of the Coronavirus COVID-19 outbreak.
With cashflow income having ground to a halt in many sectors in particular, but none more so than in the retail, leisure & entertainment sectors, it is perhaps understandable for commercial tenants to feel the immense pressure of rent payments at a time when profits are at an all-time low. It is important to understand what support UK Government has put in place during this crisis. This article aims to set out in bite-size the measures UK Government has enacted which is aimed at protecting commercial (and residential) tenants from aggressive rent collection tactics during these troubled times.
Government Support for Commercial Tenants During the Coronavirus COVID-19 Pandemic: A Snapshot
· Statutory demands and winding up petitions have been temporarily banned.
· The government are preventing Commercial Rent Arrears Recovery (CRAR) – unless landlords are owed 90 days of unpaid rent.
· The government have asked tenants to “pay rent where they can afford it or what they can,” to lessen the strain on commercial landlords.
· Commercial tenants cannot be evicted during the current time period, running up to 30th June 2020.
Section 82 of the Coronavirus Act 2020 (“the Act”) is undergoing constant review and has been now been amended; with the addition of provisions to prevent commercial landlords from forfeiting business tenancies until 30th June. As it stands, the relevant regulations relating to the prevention and restriction of the use of Commercial Rent Arrears Recovery, as well as the emergency legislation to prevent statutory demands and insolvency proceedings currently apply up to 30th June 2020.
It is important for commercial tenant to understand that landlords will be stopped by the provisions of the Act from entering commercial premises, if tenants are unable to pay your rent during the relevant time frame – as set out in the Coronavirus Act 2020. Outside of the relevant time frame, subject of course to the release of the lock down regulations, landlords will of course become able once again to exercise re-entry powers if they were previously able or entitled to do so. However, section 82 (12) of the Act makes it clear that that the UK Government may revert to the original act or extend the time frame for which the above measures are in place.
Next Steps: Going Forward for Commercial Tenants
In spite of the laudable UK Government measures aimed at protecting commercial tenants, the uncertainty of the situation, the impact of the Coronavirus COVID-19 Pandemic amounts to difficult times ahead particularly for those in the retail, leisure and entertainment sectors both for commercial tenants and their landlords. As such it is of paramount importance to keep open the lines of communication and where possible to collaboratively work out the best way forward.
It is important to note that whilst the UK Government has temporarily suspended payment collections for the duration of the Coronavirus COVID-19 Pandemic, please note that the current Coronavirus Act 2020 does not require landlords to write off missed payments. Rent and additional payments are still – by law – due, and interest may accrue for any late or missed payments under your contract terms. Therefore, tenants should continue to pay rent and other payments, where possible, during this time.
Considering the foregoing, here are some practical steps you can take to protect yourself and your business:
· Liaise with your landlord to determine which are the right steps to take for you. Communicate any issues or concerns as soon as they arise. If you start to experience cash flow issues, discuss and propose an agreement with your landlord – possibly in the form of rent deferrals, partial payments or other arrangements such as break-clauses as soon as possible.
· Document any changes or relief discussed between yourself and the landlord – including setting the name of the person you have dealt with, the date and time and of course the detail of what was discussed. Where necessary, have a lawyer check these out for you and assist you with the documentation.
· Review your contract, lease or tenancy or lease documentation to ensure you are familiar with your contractual obligations and note interest fees on unpaid or late rent. Be aware that the landlord will in most cases be entitled to recover the cost of their reasonably incurred legal fees from the tenant. This would also be a good time note whether such documents contain forfeiture or re-entry provisions as the Landlord will be stopped from doing so. If you are unsure as to the provision of your lease, then seek help from a suitably qualified professional such a lawyer experienced in commercial property and landlord and tenant matters.
· Understand which government support options are available to you and your business and seek assistance. Click here to read more about government support offered to small businesses.
· Now is the time to prepare in advance for restrictions to be lifted. Consider your obligations under UK insolvency laws and act accordingly. Once restrictions are lifted, arrange for deep cleaning measures to take place.
Commercial property disputes and commercial landlord and tenant litigation should be considered a last resort during these trying times. As such it is absolutely vital to keep open the lines of communication. However, if all else fails and a commercial tenant is facing the onslaught of an over-zealous or rogue Landlord acting without regard to the current regulations during this crisis, then the tenant should act immediately to seek the assistance of a suitably qualified professional who, among other remedies, will be able to apply for urgent injunction against acts of a rogue Landlord. A lawyer can also assist in this as well as a review and thorough advice on the provision of the relevant commercial property documentation. As always, the best advice is to seek advice and seek it early.
We are here to support businesses in these difficult times. Should you require any further information, or to speak to a member of our excellent team of Solicitors, you can contact us on 0800 037 1305 and request a Free Video Consultation.
Please note that this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.