COVID-19: Commercial Landlord and Tenant for NI/UK – rent holiday and considerations
One of the measures included in the emergency Coronavirus Bill currently going through Parliament is a moratorium on forfeiture of commercial leases for non-payment of rent for the next three months. This period may be extended if needed.
Landlords shall be prevented from exercising their right to forfeit a lease and re-take their premises from tenants that are unable to pay their rent as a result of the current pandemic crisis.
The amendment to the Coronavirus Bill on commercial leases will apply to England, Wales and Northern Ireland. It shall apply to all commercial tenants. The change will come into force when the Coronavirus Bill receives Royal Assent. It will last until 30 June 2020.
In light of this, the UK government is in the process of reinforcing their current support packages for businesses. Elements of these packages include employment support, a three month holiday on business rates and VAT payment and for all businesses in the retail, hospitality and leisure sector, a business rates holiday for the next 12 months, irrespective of rateable value of properties. This will allow businesses to free up much needed funds to pay staff.
The Executive has announced plans to give all Northern Ireland businesses a three month rates holiday along with business support grant schemes of £10,000 and £25,000 for small firms.
As commercial tenants will still be liable for the rent after this period, the UK government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.
See below a list of issues to consider during this difficult time and some ways in which to deal with them.
- If rental payments are to be deferred, the parties will need to agree on a payment plan. If the current quarter’s rent is deferred, it can be paid in full on the next quarter day (in addition to that quarter’s rent). This may work provided there is no further extension to the three month period. Alternatively, it can be set out in instalments over subsequent months or quarters
- Extreme care must be taken with the drafting of documentation being put in place to reflect the deferred rental payments to ensure that no arguments arise at a later stage. A landlord may require further protection in respect of the deferred rent being paid over installments like additional termination events and shorter time periods if an installment is missed. To reiterate the rent is not being waived
- It is yet unclear if the deferred payments will relate to just the annual rent or to the service charge and insurance rent as well. Parties will need to give due consideration to this when agreeing terms
- Documentation should be agreed and put in place as soon as possible to reflect the agreed terms. Each party will want a document in place to ensure the agreed terms are legally binding. Logistically having a hard copy document signed by the landlord and counter-signed by the tenant will prove difficult with everyone being encouraged to work from home
- If premises are forced to close, landlords need to be careful about accepting the return of the keys, as this could result in an implied surrender of the lease by operation of law.
- Parties should notify their respective insurers if premises are closed and left empty
For further information please contact Tomás McLaughlin, Senior Associate or any member of the Commercial Property team at A&L Goodbody Belfast for support on any specific Covid-19 related queries you have.
Date published: 1 April 2020