Commercial landlord guidance in a Covid-19 world

Our lives, both personal and professional, have been turned upside down since the start of the Covid-19 pandemic. We are living through extremely challenging times and the pressures on business have been severe. 

Commercial landlords have not been immune from these pressures, with some confusion developing about the rights and responsibilities of commercial landlords during the length of the restrictions.

What are the key issues facing commercial landlords?

Can a tenant terminate a lease by arguing that it has been frustrated?

The bar for a tenant to argue that a lease has been frustrated and should therefore be terminated is high. It can only apply when supervening events unprovided for in the lease significantly alter the obligations of the parties. Then the lease is brought to a premature end. Some tenants have been exploring whether or not Covid-19 restrictions might be considered a supervening event. In reality, however, it’s unlikely that a temporary inability to trade from or occupy the premises would count as a supervening event.

If the lease contains a break clause, the chances of the tenant activating that clause may increase the longer that the restrictions continue.

Can a tenant claim a rent reduction as a result of the Covid-19 restrictions?

It’s very unlikely that your tenants will be able to claim a rent reduction due to an inability to occupy the premises as a result of the Covid-19 restrictions. Very few leases contain a clause that could allow either party to say that the obligations in the lease are suspended during Covid-19. 

In the majority of leases the obligation to pay rent is only reduced or suspended if the premises are damaged or destroyed by an insured or uninsured risk. As Covid-19 causes no physical damage to your property, it’s unlikely that it will provide any grounds for a rent reduction.

As a landlord you may agree to defer or reduce rent temporarily or to have a reasonable payment plan to help tenants through the Covid-19 crisis, but the decision to do so is entirely up to you.

Am I still required to provide services to tenants?

Very few leases contain a clause that allows for the suspension of service provision by the landlord. However, the lease may contain provision that allows for the non-provision of a service if events outside of the landlord’s control make it impossible. If, for instance, contractor illness or social distancing regulations made it impossible to provide a particular service, the landlord would not be liable for this failure. 

Provision of services should always take into account the latest guidance and legislation for tackling the Covid-19 pandemic from Public Health England (PHE)

For more advice about your commercial lease, your rights, and obligations contact the experienced commercial property team at Murria Solicitors.