COVID-19: Rent Suspension Clauses

By Adam Cornbloom

While many landlords have been extremely reasonable in agreeing rent concessions during this COVID-19 outbreak, it is of course advisable to include specific rent suspension clauses in new commercial leases where possible.

 

On all new commercial leases being handled by the firm currently we are proposing clauses that allow for the rent to be suspended if the current restrictions on free movement and business remain or are reintroduced during the term. The scope of such clauses will vary depending on negotiations between the parties and there are a number of key points to be considered:

  • What proportion of rent will be suspended?
  • Will the clause relate to the principal rent only, or also to service charges and insurance contributions?
  • Will the rent be deferred or waived entirely?
  • Will advance payments made in respect of the suspension period be refunded by the landlord and if so, when?
  • If deferred, will this be repayable in instalments and will interest be charged on the deferred amount?
  • What restrictions will trigger the rent suspension? These should include restrictions on travel within a defined area (for example, TFL Zones 1 to 6 if the premises are located in London) and any limitations on trading from the premises.
  • Landlords should seek to limit the application of the suspension to restrictions on trade for the permitted use authorised under the lease, rather than general restrictions on all businesses.
  • Will the clause apply only to COVID-19 restrictions or will it apply to any future epidemic/pandemic? The latter is, of course, preferable for tenants.
  • Tenants should request that the rent suspension will apply to recommended measures, as well as mandatory restrictions. Government recommendations not to travel or attend certain businesses will impact trade.
  • The clause should refer to measures introduced by local government, as well as UK central government. For premises in London, the Greater London Authority, the City of London Corporation and London borough councils should be referenced as appropriate.
  • Tenants will want to ensure that the rent suspension will not cease when the prohibition on trading is lifted if other restrictions remain such as limits on opening hours or capacity.

These are challenging times and the law is changing rapidly. If you need any guidance or assistance on any of the issues raised in this article or any other commercial property matters, please contact Adam Cornbloom on 0207 632 1445.

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

27 April, 2020
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