Suspension of the landlord’s right to forfeit
- Rent and other monies remain due and payable by the tenant, once the moratorium ends and the landlord can seek to forfeit the lease for non-payment of accrued arrears
- Other remedies in respect of non-payment of rent and other financial sums may still be available to the landlord during the moratorium on forfeiture, such as instigating insolvency proceedings or calling on personal guarantees and rent deposits
- The moratorium does not apply to forfeiture for any non-financial breaches; a landlord remains free to proceed in respect of those in the ordinary way.
More about Coronavirus
- Is your business prepared for Coronavirus?
- 10 Ways SMEs can weather the Coronavirus storm
- A collective sigh of relief in the contracting world as IR35 postponed
- What steps should employers be taking as a result of Covid-19?
- How to overcome a business dispute during this Coronavirus Crisis?
- Changing rent payment dates to monthly, rather than quarterly
- Suspension of rental payments for a period, such as 3–6 months
- Reduction in rent, whilst the Coronavirus is still detrimentally affecting business
- That the rent is permanently or temporarily converted to a turnover-only basis
- Look at the lease! This is the key document, which governs the relationship between landlord and tenant and the terms on which the tenant has the right to occupy the premises. This, along with any side letters or other ancillary documents, needs to be examined carefully at the outset to establish the foundations of any negotiations
- Ensure that any variations or concessions are properly documented in writing and accord with the lease provisions
- Whilst a tenant may instinctively wish to “walk away”, this rarely works in practice. A landlord should not accept the keys back from the tenant, as this could arguably have the effect of surrendering the lease by operation of law. If the parties agree to surrender the lease, this needs to be properly documented in writing. This is of particular importance to the tenant, who remains liable for the tenant’s obligations and liabilities in the lease, unless and until the lease has been effectively surrendered.
- Both parties should consider the insurance position in respect of the tenant having to cease trading and the premises being left empty. The lease may well require the tenant to maintain a certain level of security, if the premises are left vacant, and require compliance with the insurer's requirements generally. The landlord will have to comply with the terms of its own insurance and this is likely to include an obligation to notify the insurers if the premises are left empty.
- Consider the terms of any personal Guarantee or Rent Deposit. Calling on these may well be an attractive remedy for a landlord, but has significant financial implications for the tenant and/or guarantor.
- Communication is key; if both parties can understand the other's situation and objectives, then reaching a mutually acceptable concession should be more likely.
- If concessions are agreed, both parties should seek legal advice to ensure these are properly documented to protect their respective interests and to avoid unintended consequences.
- Tenants should not refuse to pay the rent during the moratorium, nor simply walk away; neither of these actions is likely to release the tenant from its contractual obligations under the lease.
- Landlords should be reassured that, whilst they cannot seek to forfeit for non payment of rent during the moratorium, the rent continues to fall due and the right to forfeit for non payment of those accrued rent arrears arises again, once the moratorium ends.
Read our latest blog posts on GDPR, featuring all the latest legal news, analysis and opinion from our expert lawyers.
- By Lawbite Team
- December 22, 2020
In December 2020, the UK Furlough Scheme enacted in response to the Covid 19 Pandemic, was extended until the end of April 2021. A key aspect of th...
- By Lawbite Team
- December 08, 2020
Many SMEs are a tenant, but a good number also are a commercial property landlord. On both sides of the commercial property lease equation, times ...
- By Lawbite Team
- November 10, 2020
As the UK Coronavirus lockdown begins to lift, with non-essential shops being allowed to open in June and more establishments in July, SME owners w...
LawBite can help you
LawBite is on a mission to provide business legal advice that is easier to access, clearer to understand and much cheaper. Our on-line legal advice platform can quickly connect you with expert business legal advice. Our friendly, highly qualified business lawyers, solicitors and mediators will give you the guidance and reassurance that comes from customised legal advice for small and medium sized business.
Whether you are bringing or defending a legal claim, outsourcing work, want a business contract review to ward off disagreements, talk to an expert trademark lawyer, resolve a contractual dispute with methods like mediation and arbitration, or getting your new company set up and on the right footing with a robust shareholder agreement and GDPR standards, we can help you succeed.