What protection is available to commercial landlords during Covid-19?
NEARLY a year since the coronavirus triggered an economic tsunami in the UK and Ireland, the reality is stark.
The Bank of England has warned that the UK economy is facing its worst recession for 300 years and Ireland's Central Bank said that coronavirus has caused an economic shock unprecedented in scale and speed.
Coronavirus has resulted in the ongoing closure of vital sectors from gyms and restaurants to hotels and pubs.
There is encouraging news with the successful roll out of the vaccine but, as yet, there is no road map in place for the lifting of restrictions.
For commercial landlords and tenants, disputes in this area are all too common. Faced with the closure of their businesses through no fault of their own, is there any legal protection in place for commercial tenants?
Commercial tenants who cannot pay their rent have been protected from eviction since last March. Under the Coronavirus Act 2020, there is no right of re-entry or forfeiture of a commercial lease for non-payment of rent.
The Corporate Insolvency and Governance Act 2020 offers protection to companies from insolvency proceedings. A creditor is unable in law to issue a statutory demand against a company during the pandemic. In the event that a landlord issued a statutory demand against a tenant company at this time, it is null and void and cannot be used by the landlord in a future winding up petition.
Under the Act, there is a further restriction whereby a creditor cannot present a winding up petition unless they can show that the coronavirus has not had a financial effect on the company and that the financial difficulties would have arisen even without coronavirus. This offers further protection to a tenant company which has been severely affected by the pandemic.
There are a number of possible means of resolving a commercial landlord and tenant dispute without the need to resort to costly court proceedings and your solicitor will be able to advise you on this.
Since last March, the dispute resolution and property teams at McKees have been working on behalf of clients to negotiate on their behalf to put in place workable and sustainable solutions going forward.
For the landlord, the focus is on arriving at a satisfactory compromise wherever possible and which will ensure continued revenue from the tenant.
Possible arrangements for a tenant can include a full or partial rent-free period or a deferral of some of the rent to give the tenant some breathing space. During the pandemic, many buildings are either unoccupied or used much less. A solicitor can also negotiate on behalf of a tenant for a reduction in the service charges to ensure that the charges accurately reflect the lack of use of the property.
The protection under the Coronavirus Act 2020 and the Corporate Insolvency and Governance Act 2020 has been extended until March 31 this year. In light of the ongoing restrictions, it is hoped that the protection will be extended again beyond this date.
However, these protective measures are not intended to be in place long term. To that end, we would encourage landlords and tenants to work together so that when the coronavirus restrictions finally come to an end, both landlord and tenant are able to restore the normal working relationship.
:: Simon Russell (firstname.lastname@example.org) is a solicitor at McKees (www.mckees-law.com) specialising in commercial disputes