Issues Our Commercial Clients Have Needed Advice and Assistance with relating to Commercial Matters and The Impact on Covid-19

25 Mar2020

In the last few weeks various clients have requested information and advice on various matters. Below is a precis of the current advice we can give subject to Government Policies.

25 March 2020 – Today is the Quarter Rent Payment Date

Today is a "Usual Rent Payment Date" . If you are linked with a Commercial Lease, you will be familiar with this term.

There is no law to say that a commercial tenant does not have to pay rent due to Covid-19.

However, here are some suggestions of how Landlords and Tenants can keep their relationship and hopefully everybody survives.

For Tenants:
• Do not hide or avoid your Landlord, show them you want to work with them;

  • If you pay quarterly, offer to pay rent monthly for the time being;
  • offer a 3 month rent break with a promise to repay that quarter over the following 3 months;
    • ask for a reduction for this quarter e.g. 50% now and the remaining 50% over the next period with the usual rent;
    • ask if the Landlord will accept a 3 month / 6 month rent break, but then once rent is being paid as normal, for you to pay the usual rent plus 25%/50% of your business turnover

It is very important to understand that the Landlord does NOT have to accept any of these proposals and each Landlord and Lease is different.

Landlords need to show reasonableness and understanding BUT Landlords also have payment obligations to meet and they may be reliant on the rent.

For Landlords:
• If you have long standing Tenants, try to work with them;
• Offer tenants a payment plan e.g. monthly rather than quarterly;
• If viable try to enter into a short term agreement where you recover the rent break monies by way of a share of turnover (NOT profit) on top of usual rent once the recovery starts;
• offer a reduction, such as 75%/50% due;
• offer a rent break period with the amount due at a later date, this is NOT a rent waiver but a break and the rent is still due;
• contact your lender to ask what they can offer

It is very important to understand that even if Landlords opt not to forfeit the lease, they can choose to make a claim for a debt against the Tenant for the rent and get a Judgement against the Tenant.

The first step would be for Tenants and Landlords to discuss matters and keep their relationship going.

Any agreements reached should be put down in writing by way of a SIDE LETTER. Ideally this should be drawn up by a Solicitor/Legal Advisor but if you feel you can draft this amongst yourselves, at the very least this SIDE LETTER should be checked by a Solicitor/Legal Advisor.

23 March 2020 – What is the Current Legal Position on running a Business in the Entertainment Industry?

A number of restaurant owners and pubs/bar owners have asked questions on the rules around these.

The Government has now published the necessary regulations to enforce the closure of licensed premises as a result of the Covid-19 outbreak.

The Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 makes it a criminal offence for a “person responsible for carrying on a business” (owner, proprietor, and manager of that business) not to comply with the Regulations.

The Regulations places a duty on the responsible person, during the relevant period, to

  • close any premises, or part of the premises, in which food or drink are sold for consumption on those premises, and
  • cease selling food or drink for consumption on its premises; or
  • if the business sells food or drink for consumption off the premises, cease selling food or drink for consumption on its premises during the relevant period.

A complete list of licensed premises that must comply with the Regulations are listed in the schedule to the Regulations but includes:

  • Bars
  • Pubs
  • Restaurants
  • Nightclubs
  • Theatres, and
  • Cinemas

Food or drink sold by a hotel or other accommodation as part of room service is not to be treated as being sold for consumption on its premises.

21 March 2020 – Do Tenants still have to pay Rent?

Many people are asking for clarity about the ever rapidly changing UK Government policies in terms of rent payments and Landlord and Tenant rights.

Unfortunately due to its fast changing approach, it's not been easy to decipher all the information but as at the time of drafting this, our understanding is as follows:  

With Commercial Property, both Landlord and Tenant must abide by the terms of the Lease.
Again there is no automatic right to have your rental obligations waived and in accordance with the Lease the rent is due.

Tenants who are business owners may be eligible to apply for assistance to pay their staff and to obtain relief from Business rates or apply for Government backed loans to assist in keeping their business afloat but unfortunately rent is still due by law.

The best way forward would be for both Landlords and Tenants to discuss matters and try to work out a way forward.

The policies are rapidly changing, therefore things could change further and once again certain professionals interpretation may not match the interpretation of other professionals e.g. Legal advice may differ from Tax Advice.

Unfortunately, at the end of the day we are all in this together and whether a Landlord or Tenant, everyone is affected.