Commercial Tenants: how to protect your business from eviction during COVID-19.

May 8, 2020 admin

Commercial tenants have been offered extra protections from eviction during the COVID-19 pandemic by the UK government. If you’re facing difficulties with your landlord or paying rent, here’s what you need to do.

While commercial tenants are protected from eviction outright during the COVID-19 pandemic crisis, your landlord may still be putting pressure on you in other ways if you’re struggling to make rent payments according to the terms of your lease.

Every commercial lease requires the payment of rent. Your business’s rent will usually be payable either monthly or on the next quarter day – 24 June. If your business has missed a payment, or you may not be able to pay when it is next due, you need to be aware of steps your Landlord may consider taking to prevent mistakes being made and your business being forced out of its premises.

Although the consequences are serious to you and your business, fortunately we are here to help you make the most of the Government’s recent changes to the law.  

How are commercial tenants protected from eviction during COVID-19?

When your business owes rent to a Landlord, their usual first step is to make a demand for payment, sometimes in writing and sometimes over the phone or face-to-face. During such exchanges (which can often be heated), your Landlord may simply state that the non-payment of rent results in the lease being immediately forfeited (terminated). However, this, and many other of the Landlord’s tools are now off the table, following the Government’s latest raft of Coronavirus legislation changes.

Usually, forfeiture results in the lease coming to an end and your business being forced out and any monies owed (rent, service charges, legal costs etc) being claimed by other means. The Landlord’s stance will be that your business cannot afford to pay rent and is therefore insolvent.

Since the outbreak of COVID-19, the Government has stepped in to protect commercial tenants by preventing Landlords from claiming lase forfeiture due to non-payment of rent. You must therefore be very careful not to accept any forfeiture or voluntarily bring your lease to an end.

Landlords are also prevented from using statutory demands and winding up petitions to claim outstanding rent. This means that these steps, which are insolvency steps and precursors to winding your business up, will not be accepted and cannot be enforced. This is, however, only a temporary reprieve as the ban is currently set to come to an end on 1 July 2020. The Commercial Rent Arrears procedure, which allows Landlords to take and sell goods to cover outstanding rent, has also been restricted.

Landlords will obviously complain that they are being victimised but the argument is likely to be that the businesses contribute more to the economy and, by allowing some easing on cashflow, businesses that would be struggling can focus on surviving – which will happily cost the economy less in the long run.

Can the Landlord do anything else?

While the changes protect your business from insolvency steps (and control of goods), your Landlord can still take some steps to claim outstanding rent. These steps include:

  • manoeuvring your into a position where you voluntarily surrender the lease;
  • issuing proceedings for breach of contract (the lease);
  • using any deposit monies paid;
  • issuing a claim against any guarantors; and
  • evicting your sub-tenants, if applicable.

Any of the above steps will almost certainly result in legal costs being claimed – your lease may include a provision whereby your Landlord’s legal costs are wholly payable by your business. If you act as a guarantor of your business’s lease, or the lease of another business, you will be the easy target for Landlords and we recommend that you talk to us immediately about what we can do to help.

With all that in mind, Landlords do still have a few weapons in their arsenal, but the ones which could be catastrophic to businesses very quickly have been weakened.

Here’s how we can help.

We have a strong strategy in ensuring you and your business can take full advantage of the protection given to them by law. If your Landlord is threatening you or your business, this is what we can do to help:

  • review your business’s lease and advise on what your Landlord can do and the financial exposure to you, your business and any others involved;
  • formally correspond with your Landlord seeking rent reductions and/or rent holidays;
  • educate the Landlord on the current protection that you benefit from;
  • resist any statutory demands or winding up petitions; and/or
  • deal with any alternative rent recovery steps.

The benefit of our involvement is that the pressure on your business’s cashflow is eased for the duration of the protection and your focus can shift onto thriving rather than dealing with threatening Landlords.

Don’t risk your business, call now on 0333 2400 944 for your free 15-minute consultation or get in touch below.

Importantly, Amgen Law has provided this Insights article for information only and nothing in it should be constituted as legal advice. However, if you would like to discuss any of these issues further about a legal matter that is affecting you, please get in touch with us directly.