COVID-19 – Potential issues for landlords and tenants – Applicable to Northern Ireland only

Landlords and tenants are facing issues that have never arisen before as a result of the impact of COVID-19. We are continually reviewing this ever changing situation, however, the following are some of the questions that have been raised with us and our responses:

1. Entering into Agreements for Lease

With relevant advice, clients can still proceed to enter into Agreements for Lease. Each transaction is likely to have its own specific requirements. Issues that may arise can include (a) delays; (b) availability to carry out and complete landlord's and/or tenant's works; (c) payment of inducements; (d) financing; (e) exposure of contractors, tenants and/or employees to COVID-19 and (f) availability of materials due to supply chain issues.

2. Completion of leases pursuant to existing Agreements for Leases

A tenant may seek to delay or frustrate the completion of a lease that is to be granted pursuant to an existing Agreement for Lease due to COVID-19. The grounds that a tenant may seek to rely upon may include (a) force majeure and/or (b) frustration. It is common for Agreements for Lease to include force majeure provisions however each such provision will have its own specific terms.

The doctrine of frustration is where an unforeseen event arises that either prevents the contractual obligations being performed or radically changes the party's principal purpose for entering into the contract.

3. Termination of existing leases

Ending or terminating a lease on the basis of a supervening event will only arise in exceptional circumstances. With regards to COVID-19, you will need to refer to the express terms of the particular lease to establish if the current circumstances fall within the provisions. An existing lease may contain a break provision that it is not linked to a specific event arising.

Where the contractual term of a lease has expired but the tenant has been overholding pursuant to the Business Tenancies (Northern Ireland) Order 1996, there may be circumstances where the tenant may not be required to serve upon the landlord the requisite notice in accordance with the Order prior to terminating the lease.

4. Provision of services

Most leases will contain a covenant on the part of the landlord to provide services throughout the term of the lease, however, such a covenant is normally subject to qualifications where there are circumstances beyond the control of the landlord and/or that could not have reasonably be foreseen.

A landlord may, as a result of COVID-19, incur additional charges/expenses in providing services and/or incurring increased costs from suppliers and/or in purchasing materials during this pandemic. How a landlord seeks to recover such increased costs will be subject to the express provisions in the relevant lease.

5. Rent deposits

The Rent Deposit Deed will set out the express circumstances when a landlord may seek to deduct any rent, service charge and/or insurance rent arrears from the deposit sum. We recommend a review of the relevant deed in each specific circumstance. Due to COVID-19, a tenant may argue that it cannot be compelled to make up the shortfall in the deposit account following a deduction by the landlord.

As can be seen from the above examples, it will be necessary to carry out a detailed review of the relevant document in order to advise on the various options.  

For further information please contact James Pringle, Consultant, or 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: 26 March 2020