Clarkslegal LLP - Solicitors in Reading and London

Legal Updates

Advice for tenants and landlords of commercial property if a tenant is struggling to pay their rent

25 March 2020 #Real Estate


 

Wednesday 25 March 2020 is the next quarter day where most commercial leases will require a tenant to pay rent to their landlord for the period from 25 March 2020 to 23 June 2020.

With the continuing economic uncertainty as a result of the rapid and every changing consequences of the coronavirus, many tenants will find themselves in a situation where they may be unable to pay their rent.  If this situation does arise what can tenants do, and how should landlords respond?

  1. Keep talking

First and foremost, if you are a tenant struggling to pay your rent do not just stop paying your rent and, in any event, not until you have spoken to us or your landlord first.

If you think you won’t be able to make your next rent payment, please get in contact with us in order that we can talk through what options might be available to you.  We can also help you to put your proposition forward to your landlord.  If you are a landlord, you are encouraged to consider such options particularly in a climate where, (at least in the short term) there may not be a ready supply of new tenants.

What options are available to provide practical solutions?

  1. Monthly rental payments

A tenant’s cashflow may be such that while it cannot make a quarterly payment of rent, it could continue to pay rent on a monthly basis.

This could be set for an initial period of time (e.g. six months) which could then be kept under review.

  1. Postponing the March quarter rent

The landlord may agree to suspend the March quarter rent so that no rent would be payable until (for example) the June quarter.  To be clear the March quarter rent would in this example be ‘postponed’ and would still be payable by the tenant.  The landlord and tenant would need to agree the terms of the repayment of this postponed quarters rent, for example it may be payable over the next 12 months.

  1. Rent free period

In some circumstances the landlord may agree to waive the rent entirely for a period of time (the rent free period), for example three months.  In this example an agreement would be reached that no rent would be payable for the rent fee period.  Unlike a suspension of rent, the rent covered by the rent free period would not need to be repaid to the landlord.

  1. Rent reduction

A landlord could also agree that the annual rent payable is reduced by a specified amount for a specified period to be paid either on the usual quarter days or monthly as set out above.

In these uncertain times, we hope that we have reassured you that there are options available to you.  Whatever course of action you take, it is important that any decisions are appropriately documented to protect both landlord and tenant. 

If you would advice about how to document concessionary rent arrangements, please get in  contact with our Real Estate team who will be happy to help.

realestatelawyers@clarkslegal.com

 

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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