Due to the Coronavirus pandemic tenants with commercial leases are having a difficult time and consequently landlords too. We know anecdotally that some tenants with large portfolios have already approached their landlords and agreed rent concessions.

Options available to landlords and tenants for commercial leases

This blog explains the implications of the Coronavirus Act for commercial leases and provides some of the options available to landlords and tenants. For residential tenancies please read our separate blog.

Rent concessions

Forfeiture and the Coronavirus Act

Remedies other than forfeiture

Lease renewals

Under the Coronavirus legislation, landlords cannot rely on non-payment of rent during the “relevant period” to oppose a lease renewal under the Landlord and Tenant Act 1954.

Break rights

Break rights on commercial leases often come with conditions. Tenants should be aware that if they are unable to vacate premises owing to the lock-down then this could result in a break right being lost. Similarly, arrears of rent could endanger the operation of a break right.

Landlord’s loss of rent insurance

Tenant’s business interruption insurance

Tenants should speak to their insurers but, again, business interruption insurance would normally only apply where there has been physical damage to a property.

Force majeure

It is rare to see a force majeure clause in a modern lease, however that is not to say they don’t exist. These clauses are more commonly found in agreements for lease, development agreements and commercial contracts. If you do have a force majeure clause in your agreement then you should review it carefully and seek advice.

Frustration

Frustration allows an agreement to be set aside where an unforeseen event makes it impossible for the parties to perform their obligations. Technically a lease could be frustrated. The bar is very high, though, and we are not aware of any cases where a lease has been found to have been frustrated.

If you have any queries relating to any of the issues raised above or indeed any other commercial lease queries please email Edward Watson, David Eminton or Nicola Davies.

Our dedicated “Coronavirus – Legal advice and guidance” page contains advice and guidance on matters affecting, businesses, employers, self-employed, employees, planning legislation, property etc. and is regularly updated as and when new guidance comes in from the government or other regulated bodies.