We are operating in unprecedented times. Covid 19 is creating huge uncertainty. Many businesses over a range of sectors are considering their options. This is not just about pubs, restaurants and bars. So many businesses rely on us all being out there, spending money, requiring services, socialising.
Landlords and Tenants all over the UK are or will be in discussion about possible rent concessions. Many Tenants have seen their income stream decimated. Landlords will be aware of the risk of void periods.
We have no idea how long Covid 19 will be with us. So while it may be tempting, morally appealing and also self-serving for Landlords to accommodate Tenant requests they should still exercise caution.
How to document a concession
The Lease is a binding agreement between Landlord and Tenant. A crucial part of any lease will be the payment of rent, usually on the quarter days.
Any agreement between a Landlord and a Tenant varying the terms of the lease even for a temporary period must be carefully documented. Failure to do so could result in a Tenant arguing that a Landlord is prevented from claiming full rent in the future.
The change of rent or payment terms could impact on future rent reviews and lease renewal.
The agreement to vary should stipulate the precise terms agreed between the parties and the period during which this is to apply. If there is no fixed term to this then the agreement should set out what notice is to be served to bring any concession to an end.
It may be that a rent suspension allows a Landlord to recover the balance at a later date. Parties should consider whether interest is to apply and the possibility of stage payments.
3rd party interests
Not all leases will be direct from the freehold interest. Sub lease concessions may need approval from a superior landlord. Failure to obtain such approval could jeopardise the Landlord’s own interest. Likewise the Landlord’s interest may be charged. The legal charge or mortgage may prohibit concessions or variations without the lender’s approval.
It’s good to talk. In many cases there will be a meeting of minds and we will see Landlords and Tenants working together. But agreements reached in a time of crisis could look very different months or years down the line when Covid 19 is (hopefully) a lesson in history.