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Considerations around rent concessions

19 March 2020
 Considerations around rent concessions

Many Landlords and Tenants of commercial properties have been having a tough time in the current economic climate and now COVID-19 has added a further unwelcome and major dimension. This is particularly prevalent in the retail and leisure sectors, as footfall has dropped off the cliff but other categories or occupiers have and may continue to be impacted.

It may be that Tenants will be struggling to meet their leasehold rental and other financial liabilities when due, whether this be monthly or quarterly.  Tenants will need to be advised of potential consequences if this is the case and Landlords may also need to be advised of their legal remedies as they attempt to recover any sums due.  Different jurisdictions have different procedures and there may be statutory protections available to Tenants depending upon jurisdiction.  It is also very conceivable that temporary legislation may be enacted within different jurisdictions to give Tenants additional protection.  

It is also the case that numerous dialogues are going on between Landlords and Tenants as they discuss options to keep the Tenant trading in the occupied property.

These include:

  • Moving to a turnover linked rent rather than a fixed rent, possibly with a guaranteed base rent with a top up of a specified percentage of the Tenant's turnover.
  • Moving to a straight turnover rent, i.e. the Landlords receive  a specified percentage of the Tenant's turnover with no base rent.
  • Negotiating a rent free or rent reduced period to provide a "rental holiday" during the current major difficulties.
  • Negotiating rent reductions.
  • Negotiating that the rent will be inclusive of any service charge liabilities.
  • A combination of the above.

Of course, Landlords are also running businesses and may not be in a position easily to agree any such proposal.  If you are faced with these issues whether as a Landlord or as a Tenant and in whichever part of the world please do not hesitate to contact us and we will make sure you are pointed towards a legal  expert who can help with sound advise.