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26 March 2020

Coronavirus: 5 top tips for Commercial Tenants

Are you a commercial tenant and unsure of the future amidst the Coronavirus pandemic?

In this article Michael Fahy, Head of our Commercial Property team sets out 5 top tips for commercial tenants during the Coronavirus crisis.

Coronavirus & Commercial Tenants

1. Rental Concession

  • Contact your Landlord as soon as possible. Most commercial rents are payable on a quarterly basis and the last payment was due on 25 March 2020. Request a concession in the form of a deferment of rent for one quarter due to Covid-19.
  • Landlords are not obliged to agree to any concession on rent. This will be a matter for negotiation but on the principle of: “if you don’t ask you don’t get,” a request for rental concession should be considered.
  • If your Landlord will not agree to a deferment of the whole quarter’s rent, try and negotiate for lesser concession. For example, a 50% discount or switching to paying on a weekly or monthly basis to try and preserve cash.
  • Your Landlord is unlikely to be able to rent the premises to another tenant in the current market.

2. Break Clause

  • Carefully check your Lease to ascertain whether it includes a break clause (this allows you to terminate your Lease before the end of the lease term).
  • If such a provision is included, this will be helpful in negotiating a rental concession with your Landlord, particularly if you intimate that if a concession is not granted then you will have to consider exercising your break clause.
  • If your Landlord will not agree to a rental concession, consider exercising the break clause option – but bear in mind it usually requires at least 6 months notice and as time is of the essence for serving the notice, if it is not served with at least 6 months notice, the right will be lost.
  • There are numerous potential traps in exercising a break clause and if you are not familiar with them it is best to seek legal advice as early as possible.

3. Rates

  • If you are in the Retail, Leisure, or Hospitality Sectorscheck the Government website to ensure you benefit from the “Business Rates Retail Discount”.

4. Insurance

  • Check whether your insurance policy includes cover for “business interruption”. It is unlikely that you will have cover for Covid-19 but it is worth checking and, in any event, your Landlord may ask you to confirm whether this cover is available to you before agreeing to any rental concession.

5. Practical Matters

  • If you are vacating premises and asking employees to work from home, ensure the following steps are taken:
    • The premises are securely locked;
    • Employees are encouraged to remove any valuable items from the premises;
    • Arrangements are made for the redelivery of post; and
    • Check with your insurers whether there are any provisions in the insurance policy requiring you to notify them if the premises are left vacant for a specified period of time.

We have an experienced Commercial Property Team who can advise commercial tenants during these uncertain times, if you have any questions regarding our Coronavirus top tips for commercial tenants please do not hesitate to contact the team who will be happy to assist.

Please contact the team via email using realestatenorwich@steeleslaw.co.uk or by calling 01603 598000.

*The information provided in this article is designed to provide useful information on the subject, not to provide specific legal advice.

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