Back

Landlords and tenants coping with COVID-19 – where are we now?

9th June 2020, 9:37 am

We are now into the twelfth week of lockdown. Some restrictions are beginning to ease, such as the opening of shops or stalls that can do all or most of their trading outside. These were allowed to re-open from 1 June 2020.

From 15 June 2020, retailers of non-essential goods such as clothes, furniture, toys, electronics and indoor markets can resume trading. The operators of these shops will need to ensure that social distancing guidelines can be adequately implemented in-store.

The majority of these retailers will have leases of their premises which normally require rent to be paid quarterly on set quarter days. The next usual quarter day of 24 June is fast approaching. With certain high-profile tenants likely to continue to withhold rent, landlords and tenants will want some badly needed certainty on where we are with COVID-19 measures affecting commercial lettings, and what might happen next for upcoming lease payments.

The government announced the lockdown on 23 March – two days prior to the March quarter date. It was widely reported that landlords’ rent collection in March was significantly lower than the previous year due to the financial impact of COVID-19. Concerned that landlords would commence legal proceedings against such tenants, we saw the government introduce a series of measures restricting a landlord’s remedies for unpaid rents.

Below is a summary of measures that are currently in place and, should tenants also fail to pay the June quarter’s rent (or where tenants did not pay the March quarter’s rent and that is still outstanding), the options available to landlords seeking recovery of sums due under the lease.

Comment

A few lucky tenants had generous landlords who cancelled their March quarter’s rent. Large numbers of tenants took steps as early as February to agree with their landlords to switch their quarterly rental payments to monthly payments, or may have been granted a rent payment holiday. Some tenants however simply could not pay the rent or refused to pay.

For the tenants that were able to and did take swift action in February and early March, the impending June quarter may be of little significance. However, for landlords whose tenants did not request or were not granted such concessions, the rent collection statistics for the June quarter date will be eagerly watched and may be a key indicator of things to come.

The hospitality and leisure sector is not expected to resume trading until 1 July at the earliest, with no certainty of revenues even when they do so. Those operators are likely to still be closed come 24 June and consequently might be unable to meet their rental obligations. Those retailers who did open their doors on the 1 June or are planning to open on 15 June may still struggle to pay rent for the June quarter.

Will we therefore see a flurry of landlords, who have felt the full impact of rent payment measures, utilising any of the above procedures? The government will be very keen to avoid businesses being hit with further turmoil by landlords taking enforcement action and are likely to extend the above periods – but how long this can continue is anybody’s guess.

The government has announced that it is working with businesses and trade associations to publish a code that is intended to provide ‘clarity and reassurance’ to both commercial tenants and landlords over rent payments. We await the details .

Next Article

How will the “new dawn” affect the dentistry profession?

By Jonathan Jacobs, Head of Healthcare at Prosperity Law LLP As the dental profession begins to wake up again after […]

Read Article