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Covid-19: What happens if a tenant is unable to pay rent?

The current Covid-19 pandemic has thrown up plenty of questions about rent and property agreements. Tilly Bailey & Irvine’s Commercial Property Solicitors are here to help with your legal questions.

With numerous businesses forced to temporarily close and others suffering from a reduced revenue, many Landlords are amenable to working with their tenants to agree changes to their rental payments during these difficult times.

What action can landlords take?

It is essential that both parties know what is being agreed and that the agreement is documented. 

Although a Landlord is unable to take any action to forfeit the lease for non-payment of rent at the present time, the rent is still due and payable and there are other remedies available to the Landlord.

Negotiate your rent situation

Each situation is different and it is for the Landlord and Tenant to reach agreement.

Although there is no obligation on a Landlord to negotiate or reach agreement with its Tenant, it is in both parties’ best interests to co-operate and negotiate fairly to reach a solution which will hopefully cement the long term relationship between them and the sustainability of the business.

Any agreement which is reached will need to make it clear that it is a temporary arrangement and that there is no suggestion that the Landlord has waived its right to be paid the rent or that the agreement amounts to a permanent variation of the lease.

What should Landlords and Tenants be considering for rent?

When negotiating the following points should be considered and agreed:

  • Is the rent to be waived for a fixed period or is payment to be deferred?
  • Is the waiver or deferment to be of the full rent or a proportion?
  • Are there any payments under the lease, eg service charge and insurance rent, which are to be paid as normal?
  • If the rent is to be deferred how is it to be paid and when is it to be paid by?
  • Is the Tenant to pay interest on the deferred rent and, if so, at what rate and when is the interest to be paid?
  • Is interest to be paid on any deferred rent which is not paid by the date it is agreed to be paid? If so, at what rate?
  • Is the arrangement to be for a specified period? Can either party to bring to an end at any time by giving the other notice?
  • Is there anything which the Tenant can offer in exchange, eg giving up a break clause or agreeing to extend the term of the lease?

Seeking legal advice on rent

Here at TBI we have a team of property specialists who can advise you in relation to any property matters and can document any agreement reached between Landlords and Tenants.

To speak about commercial property legal matters remotely with our business solicitors in Teesside, call us on 0333 444 4422 or complete our online enquiry form. You can contact:

Sara Garnett
01740 646025

Andrew Beattie
01740 646027