Residential property
15 Apr 2020 News

Breathing space for commercial tenants

The UK and Scottish Governments are both keen that commercial tenants are allowed as much flexibility as possible to preserve their businesses during this temporary lockdown period and ensure continued operation from their chosen locations. The approaches north and south of the border are similar.

In Scotland, that landlords cannot terminate commercial leases for non-payment of rent for at least 14 weeks (the usual position before the lockdown was 14 days). This period may well be extended depending on how successful social distancing is.

Ending commercial leases for breaches of repairing obligation is still possible – the 14 week period doesn’t apply but it is highly unlikely a court would view this action as fair and reasonable in this current climate unless the breach was material e.g. a building was dangerous by virtue of the disrepairs.

Rent arrears can still be pursued by the other usual methods (calling on rent deposits, pursuing guarantors, suing for non-payment of rent etc.) but given court restrictions a favourable outcome for landlords is not likely.

In England commercial landlords’ rights to end business tenancies for non-payment of rent are suspended until 30 June under measures contained in the Coronavirus Bill. A business tenancy is one where the premises are occupied by the tenant for business purposes, or for a mix of business and other purposes.

The ban applies to main rent and service charges. As with Scotland, the UK government has made clear this is not a rental holiday. All business tenants remain liable for the rent, but are protected from having their lease forfeited if they are unable to pay.

No evidence that the tenant is struggling to pay its rent is required but this doesn’t allow business tenants to withhold rent.  The legislation is a conversation enabler between landlord and tenant without the threat of the occupier being kicked out of their premises.

Other enforcement options are available e.g. serving a statutory demand for payment but most landlords will not want the PR disaster that may come with this and who is going to come into the space in any event? It is also worth noting that interest remains payable and the Bill confirms landlords are not treated as having waived their forfeiture rights unless they do so expressly in writing.

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