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Commercial Property & COVID-19

09 April

Commercial Property & COVID-19

We are now a number of weeks into the Coronavirus pandemic and the wide-ranging effects are beginning to be seen by many business owners.

Clearly, these will be many and varied, from employment issues to breach of contract claims, but businesses are also looking at how the commercial effects of the pandemic might affect their business premises.

We are receiving all sorts of enquiries connected to the pandemic, but here we look at some of the business property related issues.

I am a business tenant.  Can I end my commercial lease due to the coronavirus?

The short answer is, simply, no. A commercial lease is a contract between two parties which may only be brought to an end by one party if the contract gives that party the right to do so, by a break clause for example.  There has been some comment that the contract might be “frustrated” as a result of the pandemic outbreak, but this is a technical legal principle and is, as yet, untested.  The relatively short-term nature of the pandemic means a frustration argument is likely to be unsuccessful.

I am the landlord of a business tenant.  My tenant has asked for a rent suspension because they are unable to use their premises due to coronavirus.  What should I do?

We have been asked this question, or a variation of it, many times over the last couple of weeks.  It is understandable that a tenant who is unable to use their business premises because they have been told to close or to work from home may look for a rent suspension or a rent reduction.

It is highly unlikely that the lease itself makes provision for such an unusual event and, although most properly drafted commercial leases contain a rent suspension clause, such clauses are not designed to cover circumstances such as a global virus pandemic.

The tenant therefore remains contractually bound to pay the rent on time and in accordance with the lease. If, in the unfortunate circumstances that a tenant finds itself simply unable to pay its rent, the Government has put in place temporary measures to ensure that no business can be lawfully evicted.  Despite this temporary protection, it would be preferable for both landlord and tenant to communicate around this issue and come to an agreement around payment of rent, as that is possibly going to be of more benefit to both parties in the long-term.

It is important to note that a commercial landlord is not obliged to agree to any rent concession requested by the tenant but, if the landlord is minded to agree in order to assist its tenant, a carefully drafted letter should be prepared by a solicitor.  There are pitfalls to the preparation of such a letter, so the parties should think carefully before preparing their own document. 

If you require any legal advice on these or other issues, please contact us on 0114 249 5969 or email m.rodgers@bellbuxton.co.uk.