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James Letchford discusses his top tips for commercial tenants in Property Week

  • August 27, 2021
  • By James Letchford, Partner

This article was originally published in Property Week and can be accessed here.

Protections for commercial tenants 

Just over a month on from “Freedom Day” life has returned to normal and we have forgotten the horror of the last 18 months. Right?

Unfortunately not. Whilst some businesses have weathered the Covid storm relatively unscathed, others have faced increased uncertainty made worse first by the “pingdemic” and now finding recruitment harder as job vacancies are at a record high as unemployment is decreasing.

Existing protections for commercial tenants were extended in June providing short term relief (see inset). As businesses continue to emerge from their bunkers they will continually need to reassess and embrace the “new normal”, whatever that is. There is no doubt that there has been a seismic change in working practices across all sectors especially those who want to work from home more often if not permanently.

The elephant in the room is the substantial rent arrears that some businesses have accrued whilst they remained either fully or partially closed. The UK Government recently issued a policy statement called “Supporting Business with Commercial Rent Debts” confirming the intention to introduce legislation to ringfence arrears accrued during the pandemic to allow landlords and tenants to negotiate repayment terms of to write off some or all those arrears. In default of agreements, parties may be required to go to arbitration. Those businesses which have been affected less are expected to pay in full where they can.

So whether you have a business that has thrived or is just about surviving, what should you do now?

  1. Consider your needs

If you have stumbled through the pandemic, now is the time to really think about what your business needs are going to be in the short and long term.

Ask your employees about their expectations and ask yourself what you need to offer to be attractive to future talent.

  1. Take professional advice

Understand what is happening in your particular market and what your competitors are doing. Now might be the time to have discussions about moving premises, reducing in size or renegotiating the terms of your lease. If you can take a longer term view, you might find that you can agree more favourable terms.

  1. Keep talking

Naturally if you have arrears of rent you should be speaking to your landlord and looking for a way to deal with those arrears. If you can have an open conversation with them, you may find them more amenable and you do not want any nasty surprises when the protections end next year. You may also find other solutions that you had not considered.

  1. Be flexible

You may have been planning the return to work for months with all staff coming back full time. You may have pushed back the return to work because of staff fears of being in crowded places again or indeed benefitted from productivity gains or enjoyment from staff working at home. You may have decided to work at home permanently. Each business will be different but each will need to be flexible about who is working in which location and how that is managed.

  1. Paper trail

Any concession or change to your lease should be properly documented. If your landlord was quick to offer favourable terms, make sure they stick to them and you can enforce if necessary.

Useful protections for tenants:

  • moratorium on landlords evicting commercial tenants for non-payment of rent during the pandemic until 25 March 2022
  • restrictions on issue of statutory demands and petitions for winding up companies until 30 September 2021
  • restrictions on landlords seizing goods in lieu of rent (commercial rent arrears recovery) extended until 25 March 2022

 

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