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COVID-19 from a commercial property perspective
- Author: Andy Hellier
- Date: 6th April 2020
The spread of COVID-19 has had unprecedented consequences across the UK and indeed, the entire world, as nations try to deal with the pandemic as best they can. It has presented a state of emergency that the world has not had to deal with since WW2 and life as we know it has had to change to protect people’s lives.
On 23 March 2020, the Government announced stringent new measures to slow the spread of the Coronavirus. They ordered the closure of all non-essential shops and community spaces, told people to stay at home except for very limited purposes and stopped all gatherings of more than two people in public.
Coronavirus Act 2020
The Coronavirus Act 2020 was passed on 25 March to enable public bodies to respond to the Covid-19 pandemic. The Act has three main aims:
to give further powers to the government to slow the spread of the virus
to reduce the resourcing and administrative burden on public bodies
to limit the impact of potential staffing shortages on the delivery of public services
It also covers many other aspects of daily life with the aim of keeping things running as smoothly as possible during this time. Section 81-83 is particularly relevant to the commercial property market as it has been put in place to protect tenants.
Business tenancies are being offered protection from forfeiture: the government introduced new provisions temporarily restricting the ability to enforce re-entry or forfeiture for nonpayment of rent. This measure will be in place until 30 June when it will be reviewed in line with the circumstances at that time. The government is monitoring commercial landlords’ cash flow during this time and will continue to be in dialogue with them to assist.
Q. Will tenants have to pay their rent if they’re not able to occupy their premises?
A. Yes, but in many cases payments will be missed or late and the landlord's ability to bring proceedings against a tenant has been postponed until 30th June 2020 by the recent legislation; however, the rent however will remain due. Turnover rents may be affected.
Q. Can tenants use the COVID-19 outbreak as a reason to cut a lease short?
A. Without the benefit of a break clause, this is unlikely. The criteria to argue the lease has been frustrated are stringent and the Coronavirus situation is unlikely to meet the test.
Q. What support can landlords expect if tenants are unable to pay their rent during this time?
A. Many banks are offering mortgage holidays to qualifying parties and VAT deferral is available to help manage cash flow. To find out what other assistance is available, landlords should contact their financial adviser.
Q. Is COVID-19 considered to be a force majeure and does this have any impact on landlord/tenant leases?
A. Very few leases contain a force majeure clause on which tenants can rely.
Q. My property is managed by a third party - what are they obligated to do during this time?
A. Your managing agent will maintain contact with your tenants and update you as premises fall vacant and on rents received or problems reported. They will ensure your tenant is aware of their continued obligations under the lease during this time, in terms of insurance inspections, fire safety and general health and safety.
Q. My tenants are asking for rent concessions during this time, what shall I do?
A. Concessions depend largely on the financial position of the landlord and the trading strength of the tenant. Many landlords are formally agreeing to defer rent payments, to put the tenants’ minds at rest during this difficult period. Some tenants are paying rent monthly to protect cash flow and a small proportion of landlords have been able to grant a short rent-free period.
Q. Will the pandemic be covered by any insurance my landlord holds?
A. This will not be covered on a standard property owner’s building insurance policy. It may be covered on some forms of business interruption policies and landlords should contact their insurer to clarify.
Our current service provision
Hellier Langston are open for business and have put in place all sensible measures to ensure we stay that way. In line with government guidelines, we have closed our offices in Fareham and Southampton and all staff members are now working remotely.
Commercial agency: Feel free to browse our range of available properties and get in touch to discuss further. As a result of the current government restrictions on daily life, in person property viewings are currently not available. However, we are looking into the potential of offering virtual property viewings, allowing you to view a property from your home.
Lease advisory: Our team specialises in all aspects of lease advisory, including rent reviews, lease renewals, the operation of break clauses, section 18(1) valuations, and the negotiation of lease surrenders and restructures. If you are experiencing lease uncertainties or difficulties during this time, please get in touch to see how we can assist you.
Property management: It’s business as usual in terms of liaising with tenants and landlords on properties we manage, although this is more complex at the moment given the difficulties tenants are currently experiencing. All refurbishment works are currently on hold.
Practical tips for businesses during the pandemic:
keep up to date with the latest guidelines issued by the WHO and UK government
engage with your landlord or tenant to agree concessions acceptable to both parties, ensuring these are documented in very clear terms signed by both parties (and any guarantor) to avoid future disputes
reviewing any obligations in leases, construction contracts and other land instruments in light of coronavirus COVID-19
implement enhanced cleaning measures to frequently touched surfaces
where remote or home working for employees is possible, ensure that IT systems are ready for additional remote-access usage
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