3 months’ breathing space for commercial tenants

The government is moving fast to respond to the far-reaching and severe effects that Covid-19 is having on the economy. One such response is the moratorium on sanctions available to commercial landlords.

The moratorium overrides the usual position on forfeiture for rent arrears. Unlike the usual right to forfeit if rent is unpaid for 14/21 days, landlords will not be able to forfeit a lease for rent arrears for three months. The rent is still payable and tenants should make sure that they budget for and preferably make the payments as they are due if at all possible. The announcement comes just in time for commercial tenants who have had serious concerns about paying their quarterly rent today. Landlords are likely to be hit hard and may need to approach lenders if there will be any difficulty in making repayments on borrowing.

So for now, tenants have some breathing space which will give some piece of mind in the weeks and months to come. Other obligations, such as insuring the premises, must be complied with. Landlords are encouraged to be open with tenants to seek collaborative approaches on rent payments which work for both sides. If agreement is reached on payment plans or other arrangements, it is critical to record it in writing to try to avoid disputes in the future.

Once the three month period has passed, and unless the moratorium is extended, landlords are likely to be eager to recoup rent owed and perhaps to take action if payment is not made. Our article earlier this week considers some of the practical matters to consider before any action is taken.

If you are a landlord, tenant or agent who would needs advice or would like to discuss these issues, please contact James Hemsley or Sophie Michaelides.

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