Non payment of rent due to Covid19

[Mounty]

Got a commercial tenant renting offices and warehouse from us. Been a tenant for about 5 years. Pretty big company operating nationally. 1st of April when quarterly rent was due they wrote to us saying due to Covid and reduced cashflow they would be unable to pay the rent. They would write to us again at the end of June to update us on the situation. By the end of June they will owe another quarters rent.
We've sent statements of their arrears to them just as a gentle reminder.
Just wondering what our legal rights are here to recover the money? We've let things lie for the time being but feel 3 months before they even update us is a bit unreasonable.

 

[cozzie]

is their line of business badly affected by C-19 and do you consider their arrears genuine

 

[Agri Spec Solicitor]

Press releaseNew measures to protect UK high street from aggressive rent collection and closure

The government guidance sets the scene for rental arrears issues in these tough times.
We are involved in an increasing number of cases where these problems have arisen, and each one has its own story. Covid 19 is another excuse for the serial offenders who are late with rent. If it is a genuine short term issue for a business obviously hit by the lockdown then landlords may wish to be lenient. We all have long memories.
Prudent landlords will be re reading their leases to remind themselves what happens if the rent is not paid.

 

[glasshouse]

Going to be a lot of empty premises shortly

 

[Mounty]

is their line of business badly affected by C-19 and do you consider their arrears genuine

Their business is control and recovery of fuel spillages after say an RTA or a fuel leak/spill response. Multiple sites around the country. The premises have been unoccupied since this all started due to the numbers of staff working in open plan offices, but occasional vehicle movements happening in connection with their work. I have other tenants who don't seem to be working but have still paid their rent.

 

[Mounty]

Press releaseNew measures to protect UK high street from aggressive rent collection and closure

The government guidance sets the scene for rental arrears issues in these tough times.
We are involved in an increasing number of cases where these problems have arisen, and each one has its own story. Covid 19 is another excuse for the serial offenders who are late with rent. If it is a genuine short term issue for a business obviously hit by the lockdown then landlords may wish to be lenient. We all have long memories.
Prudent landlords will be re reading their leases to remind themselves what happens if the rent is not paid.

Googling that headline takes me to the Gov advice on the situation for Commercial Rent Arrears Recovery. Not that we're at that stage yet, but advice prevents this line of action until 30th June, unless 90 days of rent is owed. By the 30th of June, they will owe 91 days rent so I guess its a waiting game?

 

[AJ123]

It very much depends what type of agreement they would be under we’re it formalised(which could be different to what they’re on on paper).
If a tenancy to which the 1954 landlord and tenant act would apply to ( exclusively occupied by tenant for business purposes for 12 months or more or on an initial tenancy of more than 12 months) then the 2020 Coronavirus act has some bearing:

Reentry for forfeiture is prohibited from 1stMarch to 30 June ( don’t be surprised if this is extended)
the tenant is still obliged to pay rent
interest if provision for it in the lease still rolls up

effectively all this does is defer the ability to kick out for failing to pay rent though. Important to note the tenant still has to pay-eventually.

If on a (genuine) licence then the above is not relevant.

The incoming corporate insolvency and governance act will prevent landlords from issuing statutory demands for rent until 30 June, I haven’t read the draft bill yet so not sure if this is restricted to 1954 act or all tenancies.

CRAR is currently still an option but it is difficult for the required enforcement agent to carry out their job due to social distancing so not that easy.

The best option in most cases is to agree a deferment, being sure it is drafted correctly so as not to waive the rent

Alternatively can take from the rent deposit, but you need to make arrangements how this will be topped back up in due course.

Or pursue the guarantor if you’ve got one.

I set out the above because it’s useful to know how big the sledge hammer is if you need it but it’s always easier using the toffee hammer if you can.

At the moment with who knows how many businesses going under or deferring expansion plans and consequently less tenants around to take up the vacant units as a result I would ask yourself if waiting for the rent is that bad compared to an indefinite void...If you can get them onto a payment plan of some sort it is normally better than the alternative.

Remember otherwise good tenants you know and trust are valuable and getting rarer these days! If possible,treat others how you would like to be treated yourself were you in their situation, imagine if you’d been prevented from working since March with absolutely nothing you could do about it. I would be straight on to anyone who had an invoice sitting in my Intray awaiting payment and pleading for time.

Good luck!

 

[Little squeak]

I would be sympathetic to their rent payment delay but write back asking for security over some of their assets in case of thier insolvency

 

[Brisel]

We've had the usual suspects not pay their rent without any consultation, despite having written to all tenants early in during the lockdown. Most have been fine - some saying no change & paid up ok, some asking for a rent holiday where they are in hospitality/retail/catering but some just stopped paying.

Have a solicitor review your agreement thoroughly, along with any correspondence. Many are facing a cash crisis due to the slowing down of payments even where they haven't stopped completely. That includes us as landlords!