Covid-19 guidance for Landlords and Tenants
8th April 2020 by Mark Timberlake
Covid-19 has had a profound effect on the property market, with landlords and tenants alike under extreme pressures given the unprecedent tightening of global cashflows. This will inevitably impact upon tenants ability to make rent payments, or either party fulfilling obligations on covenants under a lease.
Please find below some advice for Landlords and Tenants in relation to Covid-19, however with events unfolding and changing on a daily basis we would highly recommend you contact our team to talk through your query so we can provide the most up to date information.
All leases will, inevitably, include provisions for the tenant to pay rent to the landlord. If the tenant fails to pay rent, then the landlord has a number of options, including forfeiting the lease and taking possession of the property, issuing county court proceedings to recover the outstanding rent, or even issuing a statutory demand as a precursor to bankruptcy or liquidation proceedings.
Some leases may contain a force majeure clause – a mechanism to excuse one or both parties performance of their contractual obligations in the event that certain specified events which are beyond the control of the parties prevent the contract from being performed.
However, many leases do not contain such provisions, so it is essential to review the lease in question carefully to confirm what does and does not apply.
The government is clearly concerned as to impacts if its social distancing measures, and has made several announcements which relate to leased premises, and assistance to businesses in general:
- A three month moratorium on new possession proceedings relating to disruption caused by Covid-19
- Encouraging banks to give up to three month mortgage holidays for struggling landlords
- A 12-month business rates holiday for all retail, hospitality and leisure businesses in England
- The Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
- The HMRC Time To Pay Scheme
We anticipate that further relief and assistance will be announced by the government, and any of the above measures could be extended, and we will be monitoring the situation for any updates.
Finally, bearing in mind that there is a significant possibility that both parties may be in breach of one or more of their obligations, and assuming that neither party wishes to terminate the lease, then this would be a potential opportunity to seek to negotiate a rental reduction and/or suspension.
If you are faced with any of the issues raised amid the Covid-19 then please contact our team today and we will be happy to help.