Landlord and Tenant Relationships During COVID-19
Published May 7th, 2020
Unsurprisingly, Berrys Commercial Agency Department has seen a new wave of enquiries coming through that are not the usual ‘we would like Berrys to sell this property’ or ‘do Berrys have any commercial buildings to let?’
The answer to this for clarity is WE ARE OPEN FOR BUSINESS. Viewings of course must be considered as whether necessary, but we are still preparing properties for market when the lockdown is over and are still receiving enquiries across the retail, office and industrial sectors.
Both landlords and tenants have been ringing in with a variety of questions, some of the main ones highlighted below:
Q: Can you ask the landlord to grant us a rent-free period during the lockdown as we cannot use the premises?
A: Yes, but the landlord is not obligated to agree to this as per the terms of your lease. Very few leases contain a ‘force majeure’ clause which could allow either party to say that the obligations in the lease are suspended because of Covid-19.
You may like us to suggest a rent-free period and agree to extend the lease period by the same amount or for longer of course, as a gesture of good will for being able to postpone rent payments. This would be a sensible compromise on both parts, but as the tenant you would still need to maintain payment for certain other costs such as buildings insurance and any service charges applicable. We would also advise you take legal advice on this point.
Q: Does a tenant have the right to terminate their lease arguing that it has been frustrated?
A: We would need to refer to your lease document as it is unlikely they could argue this case, The bar for termination of a lease by ‘frustration’ is high: it applies where supervening events unprovided for in the lease significantly alter the parties’ obligations and bring the lease to an end. While the restrictions placed on the use of some premises because of the coronavirus pandemic might be considered a supervening event, it is unlikely that a temporary inability to occupy the premises would meet this test.
Q: Can a tenant close the premises?
A: Yes, unless the lease contains a ‘keep open’ clause or clause requiring the premises not to be left empty for a period which the closure exceeds. However, if the closure is required by law, it is unlikely that any keep open covenant or covenant not to leave the building empty would be enforceable.
You should check whether leases provide for the tenants to notify the landlord if the premises are left empty, as this may affect your insurance. It is a good idea to liaise with tenants where possible about their intentions, so that you can inform the insurers when buildings are empty.
Q: Does the Coronavirus Act 2020 give me protection as a tenant?
A: The Act looks to provide security for tenants of commercial property who are struggling to pay their rent. This restricts a right of re-entry or forfeiture for non-payment of rent during this crisis, this is actually a targeted relief and perhaps not as far reaching as some might think. The provisions are limited in their scope, and while tenants might feel that there will not be any repercussions should they not pay their rent now, there are a number of factors that need to be kept in mind and which might have unintended consequences further down the line. Moreover, the provisions only apply up to 30th June 2020, after which time the normal position will resume.
Please contact Kevin O’Dell in the first instance on 01536 213176 email firstname.lastname@example.org to discuss your current situation and advise further as each lease and case will be different.