COVID-19 & Lease Consultancy – Investors
Is my tenant entitled to a rental concession?
It is your decision whether you agree to a reduced rent, a rent free period or paying monthly instead of quarterly. The is not suspended due to coronavirus and in these unprecedent times it is for you to decide how to respond.
If you agree to offer a rent concession then the agreement should be by way of a side letter explaining the changes and for how long these will last. Your tenant may request a deed of variation which is a lease variation and therefore a side letter is preferable.
Do I have to keep the premises open?
You are required to keep your building open for tenants unless the government imposes statutory regulations requiring the property to close. Otherwise, you might be in breach of quiet enjoyment or non-derogation from grant.
If infection of Covid-19 has occurred within the building it is likely that you will be acting reasonably should you restrict access to the common parts. Most commercial leases permit landlords to restrict access to common parts in an emergency.
In these circumstances, the building may have to close as tenants would not be able to access the premises. Landlords are generally allowed to suspend provision of services if the building has to shut in an emergency and the service charge would be reduced accordingly.
Can I lease obligations be suspended due to force majeure?
Most leases do not include provisions permitting suspension or termination due to ‘force majeure’ i.e. an event beyond the control of the parties such as a natural disaster. Leases will usually continue and the parties are obliged to perform their lease obligations.
Does a keep open covenant still apply?
If a tenant closes its premises then it will be in breach of a keep open covenant. However, these are difficult to enforce and any claim for damages will be difficult to quantify unless the tenant is paying a turnover rent, where a landlord can determine the turnover loss for the period of time when the premises are closed. This usually applies to retail or leisure premises.
For forfeiture or an injunction preventing closure, there is case law which says that these are not appropriate remedies for breach of a keep open covenant. Landlords may not able to enforce such a covenant if the tenant closes it’s business but continues to pay rent.
If government regulations force closure of premises, the covenant for tenants to comply with statutory regulations is likely to take precedence over a keep open covenant.
Who pays for any additional cleaning costs?
It is likely that additional cleaning costs will be paid by the tenant via the service charge. A sweeper clause appears in most commercial leases which gives the landlord an ability to recover all reasonable costs.
We endeavour to provide the latest advice and will update this page when necessary. Each answer is date stamped, with the information correct at the time of publication. The information provided is for guidance only. It should not be relied upon for any other purpose. Always seek suitably qualified professional advice when making property and financial decisions. If you are in any doubt and require professional advice, our team can be contacted on 0800 023 5310.
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