I run a barber shop and have been unable to trade for many months over the last year as a result of the pandemic. My landlord is demanding that I pay rent even though I cannot open due to lockdown regulations. Do I still have to pay my rent?
Your situation is common, but ultimately you remain liable to pay the rent (and service charges if applicable) despite being unable to trade for many months.
The Government has issued a Code of Practice for commercial property relationships during the Covid-19 pandemic. The Code encourages landlord and tenants to be transparent with their financial position and to try act collaboratively to deal with rent arrears and future rent.
Due to various restrictions currently in place preventing a landlord taking enforcement action and the risk of a landlord being left with an empty unit, following the Code is a pragmatic way to find a compromise solution.
I have seen landlords and tenants agree rent concessions (a waiver of some or all of the rent) or a rent deferment (paying the arrears over a period of time once the tenant is able to open for trade) as compromise solutions.
My tenant runs a beauty salon and has not paid their rent because they have been unable to open for trade. What action can I take?
Your situation is not uncommon, but your options are currently limited. The Government has temporarily restricted landlords from taking specific action against tenants of commercial premises when those tenants have been unable to pay rent due to the Coronavirus pandemic.
You are unable to forfeit the tenant’s lease as a result of their failure to pay rent, although a landlord can forfeit a lease for another reason permitted by the lease.
Additionally, you cannot wind-up the tenant’s business unless you can show the tenant’s business would have been insolvent when disregarding the effect of the Coronavirus pandemic.
Lastly, you cannot exercise CRAR (Commercial Rent Arrears Recovery) unless the amount of days’ unpaid rent exceeds the current thresholds.
The measures are designed to protect tenants, and have repeatedly been extended. It would not be out of the ordinary for these measures to be extended again.
An option for landlords is to issue a money claim against a tenant. This can be a costly and risky, and a judgment is only worth the paper it is written on if the tenant has the means to satisfy the judgment.
Landlords and tenants are encouraged to follow the Code of Practice issued by the Government to try reach an agreement in respect of the rent arrears, which is ultimately to the benefit of each party. If the tenant is an individual, the Debt Respite Scheme coming into force on 4 May 2021 may also impact on recovery.