Governments throughout Europe and further abroad are taking unprecedented measures to prevent the spread of Covid-19, with a dramatic impact on global economies. In the UK, many businesses have closed their doors or reduced their customer footfall to comply with the Government’s guidance on social distancing and self-isolation, with dramatic repercussions for their turnover and profitability. Whilst the Government is hurrying to introduce emergency legislation to give financial assistance, the reality on the ground is that both landlords and tenants face a challenging and uncertain few months.

March quarter payments

Today is the quarter day for the payment of rents due under most leases. The impact of non-payment will be significant however be aware of the following when considering your options for recovery/the granting of concessions:

Recovery – forfeiture

One remedy for a landlord is to effect forfeiture should the rent remain unpaid for a period of generally between 14- 21 days, however the government is proposing legislation whereby tenants who are unable to pay rent due to the impact of COVID-19 have protection from forfeiture of their leases until at least 30 June 2020. Whilst this proposal does not yet have Royal Assent it is likely to obtain the same imminently and before the right to forfeit arises in relation to the March quarter.

The intended provision will only delay the right to forfeiture, it will not affect a landlord’s right to claim forfeiture or recover rent after the three-month period ends. The government intends to remain in dialogue with landlords and monitor the impact on commercial landlords’ cash flow.

Rent Concessions

A number of landlords are opening dialogues with their tenants re rental concessions, payments monthly or rent deferments.

Careful consideration will be needed as to what exactly is being agreed:

• Side letters for Covid-19 are intended to be short term making it personal to the tenant and not their successors in title. Landlords will need to consider whether they require the letter to be personal or bind their successors in title.

• Is the cessation to be in relation to just rent or other payments (e.g service charge).

• Where the rent is being deferred; for what period? What is the proposed repayment plan? Is interest to subsequently be paid?

• Turnover rent – if base rent is to be deferred, what is the intention re turnover arrangements for the remainder of the year?

• How will the concession be terminated? For example insolvency of the tenant / a certain period / where there is a significant breach of another covenant.

Land Law have already prepared precedent side letters for rent suspensions, monthly rent payments or rent reductions to be used in these circumstances, so please let us know if these can be of any help to you. In utilising these, consideration will need to be given as to whether there are guarantors who should be a party to it, whether the obligations to lenders should be considered and whether the tenant may have business interruption insurance which would cover the payment of rent before granting such a concession.