The coronavirus and commercial leases

We find ourselves facing great uncertainty in the short term and possibly beyond.

There are calls for commercial property landlords to suspend rent for a period. However those commercial landlords often need the rent to meet their own liabilities.

The proposals as of today for the self employed mean they get very little additional support through the crisis, as compared to employees, and a lot of commercial landlords are self employed. Hopefully this imbalance will be dealt with in coming days and weeks but it does create a real problem for both landlords and tenants. Of course the tenants are in the same boat.

Under an existing lease there are strict contractual liabilities. If a commercial tenant stops paying their rent they could end up having their lease forfeited and losing their lease. This would be disastrous for the future of their business. If they have personally guaranteed the lease and/or other business liabilities the knock on effect could be personally devastating too.

Long term commercial landlords want good tenants and tenants want premises to trade from. As there is a common interest, and also out of plain humanity, it is in all parties interests to try and come up with a solution.

If a rent suspension is agreed how will this work legally? Will the lease term be extended say by three months, if that is the suspension term? Will it be paid back? Will there be interest charged?

For leases which have not been concluded tenants will not want to tie themselves in when in effect they could complete a lease and not be able to trade. Neither landlord or tenant will want to walk away as long term they both want the same thing. Can a deal be struck whereby the parties tie themselves in but it takes into account the coronavirus?

This situation is fast moving but as businesses are unable to properly trade, if at all, urgent action will be needed to try and ensure that once we are the other side of this as many businesses as possible can recommence in one way or another.

If you are worried please do contact me and I will be happy to chat through it. Initially either PM me or email me at [email protected] and we can arrange to talk.