Collaboration is key for commercial landlords and tenants - Alastair Mylechreest of ASH and Co
The current coronavirus pandemic is causing significant uncertainty for all types of organisations in the UK, from restaurant chains to manufacturers, charities and private individuals.
For businesses, there is a huge concern on costs at a time when the turnover of most will be falling. The government has announced a number of schemes to help, most significantly the Coronavirus Job Retention Scheme (Furloughing).
One of the next costs businesses are concerned about is rent, which brings to the fore the relationship between commercial landlords and their tenants. Both are under severe pressure right now and are desperately searching for solutions.
ASH Chartered Surveyors are working closely with both landlords and tenants and believe the key theme in this current crisis is collaboration. Stand-offs, threats and a refusal to compromise will only end up damaging both parties.
One of the recent measures announced by the Government, as part of the Coronavirus Act, is a temporary suspension of the ability to forfeit commercial leases for non-payment of rent until June 30 (this date may be extended). This provision only creates a little breathing space for the tenant and the rent will remain due under the terms of the lease.
Many tenants have already approached their landlords for some form of concession and indeed some landlords have proactively offered concessions to their tenants.
The requests are varied as are the responses of landlords, but we are pleased to see most landlords and tenants are taking a collaborative, pragmatic approach reflecting the cash flow impacts on both parties and protecting the long-term interests of both. There is no single solution that will work in every situation and we are working hard to broker bespoke deals that work for the specific situations that the individual landlord and tenants find themselves in.
The details of any concession deal will vary from one case to another. Initially most requests are for temporary rent reductions, rent free periods and rent deferrals. Increasingly we are involved in lease re-gearing, with lease extensions, removal of break clauses, deferral of rent reviews and stepped rentals examples of the changes in leases that are being agreed in exchange for rent concessions.
In most cases service charges and insurance premiums are kept separate from these arrangements as these are costs of property occupation that must continue to be paid.
Once any concessions are agreed it is essential that they are documented clearly to ensure that both parties understand the outcome.
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