News

Coronavirus crunch point for commercial landlords and occupiers as quarterly rent due

Wednesday March 25 2020 is likely to prove a crunch point for retail, leisure and commercial occupiers, with quarterly rents due.

1 minute read

Published 24 March 2020

Key Contacts

Share

COVID-19 has already seen the closure of the hospitality sector and with further restrictions expected, landlords and tenants will need open and frank discussions regarding their ability to pay.

Jane Lindop, a Real Estate lawyer at Collyer Bristow whose clients include both landlords and tenants, comments.

“The Government has introduced a raft of measures to help businesses and their staff that will be of help to tenants and should be explored. It is also likely that, as this crisis deepens, further measures of support will be introduced.

“Whilst landlords may be reluctant to agree any rent concessions, they and their tenants should open an honest dialogue. Landlords may accept monthly instead of quarterly rental payments or may even agree to a rent-free period.”

“It is likely to be in landlords’ interests to protect tenants from insolvency, particularly if that tenant has a good rent covenant and is confident that business will return once normal trading positions return. Landlords will, of course, be very aware that it will be difficult, if not impossible, to find new tenants at this particular point in time.”

Jane adds: “Any rent concessions between a landlord and occupier should be formally documented, typically by way of a side letter, setting out clearly the concessions agreed and the time period in which they apply.

“Where the current occupier is not the original tenant who took the lease, a landlord may have taken an authorised guarantee agreement (AGA) from their predecessor. An AGA can allow the landlord to pursue the previous tenant for payment of rent if the current tenant defaults.”

Landlords with tenants who have persistently delayed or failed to pay rent, or who are in breach of covenants, such as repair of a property, may decide that forfeiture is the best option.

If forfeiting for non-payment of rent, a landlord can take back immediate possession by re-entering the property and changing locks. However, says Jane, if forfeiture is based on a tenant’s breach of other covenants, notice must be served giving the tenant reasonable time to remedy the breach.

Jane said: “If a lease is forfeited, tenants can also turn to the courts to have it reinstated, but this is usually only granted if the tenant is able to pay the rent arrears or make good breaches of covenant.”

Despite the Government’s interventions, the coronavirus pandemic is, unfortunately, likely to see businesses collapse and fall into insolvency. If a landlord has taken a rent deposit, they will be entitled to retain all or part of it to cover arrears and other losses following the termination of the lease.

Jane adds”: “If the tenant had provided a guarantor, a landlord may call on them to cover losses or take on a new lease on the same terms. However, if a landlord does not have any of these they will be treated as an unsecured creditor and will have to claim for any sums owing in the insolvency proceedings.”

Related latest news PREV NEXT

Arrow Back to News

News

Coronavirus crunch point for commercial landlords and occupiers as quarterly rent due

Wednesday March 25 2020 is likely to prove a crunch point for retail, leisure and commercial occupiers, with quarterly rents due.

Published 24 March 2020

Key Contacts

COVID-19 has already seen the closure of the hospitality sector and with further restrictions expected, landlords and tenants will need open and frank discussions regarding their ability to pay.

Jane Lindop, a Real Estate lawyer at Collyer Bristow whose clients include both landlords and tenants, comments.

“The Government has introduced a raft of measures to help businesses and their staff that will be of help to tenants and should be explored. It is also likely that, as this crisis deepens, further measures of support will be introduced.

“Whilst landlords may be reluctant to agree any rent concessions, they and their tenants should open an honest dialogue. Landlords may accept monthly instead of quarterly rental payments or may even agree to a rent-free period.”

“It is likely to be in landlords’ interests to protect tenants from insolvency, particularly if that tenant has a good rent covenant and is confident that business will return once normal trading positions return. Landlords will, of course, be very aware that it will be difficult, if not impossible, to find new tenants at this particular point in time.”

Jane adds: “Any rent concessions between a landlord and occupier should be formally documented, typically by way of a side letter, setting out clearly the concessions agreed and the time period in which they apply.

“Where the current occupier is not the original tenant who took the lease, a landlord may have taken an authorised guarantee agreement (AGA) from their predecessor. An AGA can allow the landlord to pursue the previous tenant for payment of rent if the current tenant defaults.”

Landlords with tenants who have persistently delayed or failed to pay rent, or who are in breach of covenants, such as repair of a property, may decide that forfeiture is the best option.

If forfeiting for non-payment of rent, a landlord can take back immediate possession by re-entering the property and changing locks. However, says Jane, if forfeiture is based on a tenant’s breach of other covenants, notice must be served giving the tenant reasonable time to remedy the breach.

Jane said: “If a lease is forfeited, tenants can also turn to the courts to have it reinstated, but this is usually only granted if the tenant is able to pay the rent arrears or make good breaches of covenant.”

Despite the Government’s interventions, the coronavirus pandemic is, unfortunately, likely to see businesses collapse and fall into insolvency. If a landlord has taken a rent deposit, they will be entitled to retain all or part of it to cover arrears and other losses following the termination of the lease.

Jane adds”: “If the tenant had provided a guarantor, a landlord may call on them to cover losses or take on a new lease on the same terms. However, if a landlord does not have any of these they will be treated as an unsecured creditor and will have to claim for any sums owing in the insolvency proceedings.”

Key Contacts

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):



    Article contributor

    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (calling not available)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up
    ExpandNeed some help?Toggle

    < Back to menu

    I have an issue and need your help

    Scroll to see our A-Z list of expertise

    Get in touch

    Get in touch using our form below.



      Business Close
      Private Wealth Close
      Hot Topics Close