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As businesses across the UK continue to tackle the challenges caused by covid-19 and keep up with the ever-changing government guidelines, many business owners and commercial property owners, alike, have growing concerns about their premises and their legal obligations.

 

In times of financial strain and frustration it is not uncommon for commercial landlords and tenants to butt heads over their rights, obligations and liabilities.

 

But, how can you try to avoid a messy fall out or costly legal dispute?

     

Understand Your Lease

 

It is key for both landlords and tenants to understand the terms and provisions in their commercial leases before taking any action. If you signed Heads of Terms without reading the small print – now is the time to do some bedtime reading or give Lamb Brooks a call if you need help understanding the terms and de-mystifying the legal jargon. If you are a landlord who has been using the same lease template for a while or who wants to get to grips with the terms they have set out to tenants, then please get in touch also.

 

Check for break clauses, turnover rent provisions or any force majeure clauses (which are uncommon in commercial leases – or at least will be until now). It is also worthwhile for landlords and tenants to check their insurance policies for business interruption cover, however, speak to your insurance before getting too excited if your policy does include this cover as you may find that a global pandemic doesn’t apply!

     

Refusal of Rent or Termination of Leases

 

One of the measures introduced by the Government on 25 March 2020 outlined that commercial landlords are precluded from forfeiting leases or evicting tenants for non-payment of rent. This measure is in place until 31 December 2020. This does not mean, however, that tenants should be unreasonable with their payments and any non-payments should be agreed with the landlord. Any rent holidays, approved arrears or payment plans should be discussed ahead of time and a written record made to evidence any changes  Its worth reviewing the definition of rent under your lease as it can include insurance rent and service charge.

     

Communication is Key

 

If you are leasing a commercial space and have concerns over the viability of your business or you are in financial difficulty, then it is best to start communicating with your landlord as early as possible before problems escalate. If your landlord does not understand the pressures you are facing, then they are unlikely to act sympathetically if you need to ask them for any favours.

 

It is important that both parties are open, are heard and work together to find a resolution that suits them both commercially.

     

Don’t Be Afraid To Negotiate

 

Very likely, it is in the best interest for both the landlord and the tenant for the commercial space to be occupied. Particularly in the current climate. A landlord is unlikely to want to see a client’s business move out, meaning that they must find another business suitable and ready to take over the lease. This is expensive, time-consuming and there is a risk that the premises will stand empty, brining the landlord no income. Furthermore, if the property is empty for more than 3 months the landlord may have to pay business rates.  Therefore, you may be able to negotiate a rent reduction, a rent-holiday or change some of the terms in your lease that will allow you to remain in the premises feeling a little more financially confident.

     

Exiting a Lease

 

If your business is unable to continue and is keen to exit the commercial lease, then there are some options available.

 
  • Use a legal break that is written into your lease. If a break clause is available then you will have to follow strict procedures that are set out, i.e. notice periods and exercising your right to use the break in writing. It is worth triple-checking the terms attached to a break clause to ensure that you do not fall foul and find yourself unable to utilise the break due a minor lapse in days of notice given or by writing to an incorrect address. Its worth noting that once a notice is served it is irrevocable so be sure before serving that it’s the right decision for you. You may also have to carry out repairs or provide the landlord with a lump sum in relation to dilapidations on the property so you should factor this in when deciding whether ending the lease is the right option for you.
 
  • Negotiate an early exit. If you do not have any break clauses or the next break clause is too far in the distance, then you can negotiate an exit with your landlord. This may incur large charges to compensate their loss of income and it is worth getting legal advice before doing this – but you can weigh up the costs of exiting vs the costs of remaining.
 
  • Assign to a third party. This is a trickier option, but if your landlord is not forthcoming with negotiating an exit you may be able to maneuverer this by finding a new tenant to replace you. The landlord is likely to have their own restrictions and requirements which is usually set out in the lease for any potential new tenant.  You should consider working together and a sweetener is that you are responsible for finding a new tenant and the landlords’ legal costs.
   

Settling a Commercial Property Dispute

 

In uncertain times, a stressful dispute between a landlord and tenant can be too much to cope with.

 

It is always advisable to act promptly and calmly when faced with a business dispute. Often it is important for both parties to maintain a working relationship and remaining professional can improve the chances of both parties reaching an agreeable outcome.

 

If you are looking for assistance in negotiating your lease, exiting your business premises or you need legal advice before an issue becomes a battle, please get in touch with our team of commercial experts at Lamb Brooks.

 

Call our office on 01256 844888, email enquiries@lambbrooks.com or speak to our online chat assistant who will be happy to take your details and get the ball rolling.

 

Alternatively, you can contact Melanie Roberts, Head of Commercial Property directly on 01256 305531 or Jill Lipscombe, Dispute Resolution Solicitor on 01256 305584.

     

Other Articles You May Be Interested in Reading:

Do I Still Need to Pay My Commercial Property Rent?

Recovering Debt in Crucial Times

Latest Guidance: Should My Employees Be Working From Home

       

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.   Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.