The challenges facing Landlords and Tenants with commercial leases and commercial properties during the current Covid19 restrictions will need to be dealt with using a number of different approaches. Very few Tenants will be able to discharge rent payments due to the current restrictions and even those fortunate enough to qualify as an essential service will undoubtedly see a downturn in income.
The following options can assist both Landlords and Tenants in regards to commercial leases during the current crisis:
- Both the Landlord and Tenant could agree to defer the rental payments to a later date. The deferred payments could then be paid in instalments on top of future rent payments.
- The lease could also be reviewed and renegotiated. This could be of significant benefit to both parties and they could mutually agree to add, amend or remove certain terms of the lease. Such a review/renegotiation could be done in consideration for rent forgiveness.
- The Landlord could apply interest to future rental payments and be ultimately reimbursed over the next few years of the lease.
- Another option for both the Landlord and Tenant would be to extend the term of the lease. This could operate on the basis that if the business was closed for 2-3 months then the lease would be extended by that time once the term expired. This would take the financial pressure off of the Tenant but may not be an attractive option for the Landlord.
Whilst there are multiple issues to consider for both Landlords and Tenants during this time, Landlords who have mortgages on their premises will also have to try to obtain a moratorium to defer payments. There may be other ways that a Landlord can negotiate an agreement with their lender depending on their circumstances.
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