The impact of COVID-19 on Commercial Landlords and Tenants

• Posted onApril 29, 2020

Over the course of the last 6 weeks of lockdown we have received numerous enquiries from both commercial landlords and tenants who are grappling with the difficult conditions arising from COVID-19.

Cheryl Leigh, Commercial Property Solicitor at WSP Solicitors, examines what the impact COVID-19 could have on landlords and tenants of commercial properties.

Loss of Income Revenue

Inevitably this worldwide pandemic has created a great deal of uncertainty for so many businesses and individuals across a broad spectrum of industries.

We know how concerned businesses are about the loss of income revenue now and also the ongoing impact on turnover when the lockdown restrictions are to be lifted.

The Government has announced unprecedented financial support packages and schemes with a view to helping businesses and individuals through this difficult time and further information about what is available can be found via the Gov.uk website here.

Rent as an Income and an Overhead

Inevitably rental is one of the largest overheads for most businesses and therefore both commercial landlords and tenants find themselves in very difficult positions: Tenants, unable to trade either at all or at reduced capacity, are unable to meet the rental costs and the landlords, equally reliant on the rental income to operate their business, cannot cover their own overheads without payment being made. Most landlords and tenants appear to be working together at this time to find a practical solution.

At the moment a Landlord cannot forfeit a commercial lease if a Tenant is unable to pay their rent.  This currently only applies until 30^th June 2020.  However, Tenants need to bear in mind that the rent still remains due under the terms of the lease and is therefore accruing as an ongoing debt which will need to be paid to the Landlord, failing which the Landlord will be able to bring proceedings against the Tenant to recover those monies.

How can Landlords and Tenants come to an agreement during this time?

It is possible for the parties to reach an agreement that will hopefully work for them both in the long term taking in to account one another’s current circumstances.  Obviously each situation will differ and there is no one solution that applies to every scenario.

It is possible for the parties to agree variations to the existing lease, for example, deferred rent reviews, lease extensions or the removal of break clauses.  Alternatively, temporary reductions to the rent, a rent free period or deferral to the rental.  If an agreement is reached, then it must be recorded in writing and we can assist you with this.

If you are either a commercial landlord or tenant looking for advice throughout this uncertain time, then please contact our Commercial Property Team if you have any queries at all. You can also use the form in the sidebar of this page. Alternatively, you can call us on 01453 847200