North East commercial property landlords and their tenants need to keep talking to help all parties navigate their way through the Covid-19 outbreak.
Sara Malik, solicitor in the specialist commercial property team at Hay & Kilner Law Firm in Newcastle, was speaking after secretary of state for housing, communities and local government Robert Jenrick announced new rules which prevent landlords evicting tenants who can’t pay their rent due to the pandemic’s impact on their business.
Rather than providing a payment holiday, tenants will remain liable for the rent that they owe under the emergency measures, including any sum they are liable to pay under a relevant business tenancy.
The new rules, which are included in the emergency Coronavirus Bill, also restrict the landlord’s right to re-enter the property or forfeit the lease if rent isn’t paid.
They cover the period up to 30 June, with the option to extend them available to the government if required.
Other provisions within the Bill include halting or delaying any court proceedings aimed at possession of commercial premises from landlords in the same period.
And Sara Malik believes that taking a pragmatic, conciliatory approach on both sides is the key to avoiding unnecessary problems and disagreements.
She says: “While many tenant businesses have seen a substantial fall in their revenues which could make paying their rent almost impossible, their landlords will still have costs for things like insurance and utilities to meet, not to mention mortgage payments, which could also leave them in financial difficulty.
“With the first of the traditional Quarter Days for payment of commercial rent having just gone by, many landlords and tenants have been talking about making voluntary arrangements on what was owed and the measures that are about to be introduced will formalise this process.
“Rent reductions, rent holidays and changes to payment frequency have all been put in place by different operators with a view to alleviating cashflow difficulties, but in such a fluid situation, it makes sense for all parties to be communicating regularly and to be open with each other about their respective situations.
“While landlords can’t take back possession of their property due to rent arrears, they retain access to other means of chasing up what they’re owed if the need arises, such as by pursuing a debt claim, making a statutory demand if the tenant is insolvent or through the Commercial Rent Arrears Recovery procedure.
“It’s also worth noting that, as thing stand, the initial period for the new rules currently ends just before the next Quarter Day payments are due, which will doubtless bring some difficult situations to a head if the deadline doesn’t change.
“Everyone is trying to find their way through this unprecedented situation as best they can, and by taking a cooperative approach, landlords and tenants will give themselves the best chance of avoiding any unforeseen problems in the short and long-term.”
Established in 1946, Hay & Kilner is one of North East England’s leading independent law firms and provides a full range of legal services to businesses and individuals from both within and outside the region.