Advice to landlords where tenants can’t pay rent

With individuals and businesses starting to feel the pressure of the impacts of Covid-19, Cheryl Smith and Fiona Squire have put together some advice to commercial and residential landlords regarding tenants who become unable to pay their rent.

On a commercial basis; landlords and tenants alike are concerned for the future of their businesses and livelihoods. As businesses are starting to close their doors to facilitate social distancing, the question of how to pay overheads such as rent gets bigger. It is no secret that in all leases, the tenant is required to pay the rent due and on time throughout the duration of the term and usually if they fail to do that within a specified period the landlord is entitled to take action and forfeit the lease. This is really a last resort process as it is in everyone’s interest for the business to continue and be successful. Unfortunately, this may not always be possible.

On a residential basis; tenants may find themselves unable to work either through illness or their place of work being closed and therefore unable to pay rent and keep a roof over their heads. Landlords will be concerned as to whether they will be able to pay their mortgages and/or gain enough income from their rental properties to enable them to survive. Under the terms of tenancy, tenants are obliged to pay rent in accordance with the tenancy agreement. A failure to pay rent can result in a landlord serving notice on a tenant with a view to evicting them from the property. It is important for landlords to note that it is unlawful to evict a tenant without having first obtained a court order for possession. The courts are currently still open and functioning but it is not know as to how long this will continue.

A balance needs to be struck enabling both the landlord and the tenant to survive financially. The Government has announced a series of measures including mortgage holidays, business rates holidays and grants for small business, and there are further measures to come with legislation being drafted.

Our advice is quite simply to communicate. If you are envisage having problems, talk to each other, negotiate. Are there any solutions or compromises that can work out positively for both parties? Whilst any solution is unlikely to be perfect or ideal, is there a reduction in rent or some other compromise that can be made to keep the situation going? Be pragmatic, there is no guarantee another tenant will be waiting in the wings to take over the premises particularly in an uncertain economic climate.

Until the economic climate stabilises and until the virus has run its course, we simply do not know what will happen in the commercial or residential rental sector. There are currently daily bulletins from the government and this is a fluid situation.

Whatever proposals you consider it is important that you seek professional legal advice on the consequences before finalising arrangements. Clear documentation of any deals agreed will be crucial in avoiding disputes, misunderstandings and potential legal action later. Every case will need to be addressed and dealt with on its own merits.

It is imperative that landlords keep up to date with the latest Government announcements via a reputable news source and consider what it means for them. There is a lot of false information being put out on social media and other media outfits which is not helping the situation. New measures are coming out every day to help us all through the situation we find ourselves in.

For further advice and information please contact Cheryl or Fiona, or complete a contact form for us to call you back.

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