This post has been written by Mohammed Rahman, Commercial Property Solicitor for BMTC Law – it seeks to look at the rent payment position where both parties are hoping to keep the lease ‘alive.’ It does not deal with default and termination of a lease, which we will deal with in a later article.
Helping your Cash flow
As all businesses seek to manage cash flow during the Covid-19 crisis over the coming weeks and months, commercial tenants could look at how and when they make their payments of annual rent to their landlords.
Shortening the rent payment period, or offering a reduced rent
To avoid being in breach of their lease terms, a tenant should never not pay the rent without communicating with the Landlord first. They should seek prior agreement with their landlord, and decide to offer monthly as opposed to quarterly rental payments, and/or a reduced rent.
This means that less cash needs to be found for each payment, allowing a tenant a little breathing space to assess how their business is going to fare over the next few months.
Put your proposal in writing
Once you have decided what you can offer, speak to or write to your landlord as quickly as possible. Follow any unwritten contact with a clear and simple email or letter setting out how much you can pay, when you will pay and how long you think the arrangement might last.
Keep the position under review
Keep the position under review and keep the lines of communication open with your landlord.
Demonstrate that you are doing all you reasonably can to meet the payment obligations of your lease, by still paying an annual rent – even if through a shortened payment period and/or at a reduced rate, whilst keeping your business afloat.
Commercial landlords – how to respond?
Whilst this post is written primarily from the perspective of advising a commercial tenant, much of our work is also for commercial landlords. The issues are the same, albeit may have different ramifications.
Many landlords will want to keep a good tenant in their premises so as not to give rise to voids.
If a tenant has otherwise been a reliable tenant, concessions that can be agreed now may well serve both parties best in the long run. Landlords should consider noting to their tenants that any/all concessions are agreed without prejudice to the continuing provisions of the lease.
Both landlords and tenants need to ensure that they keep communications open with each other throughout this difficult period.
Disclaimer: This post represents our best interpretation of HM Government’s guidance, where applicable, at the time of our writing. Both the content of the post and any guidance it is based upon will be subject to change.