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COVID-19 – Tenant requests for “Rent Holidays”

24th March 2020

With the outbreak of COVID-19 gripping the nation, many tenants up and down the country will be looking into what options are available to them for reducing their overheads, in such troubling times.

Similar to the arrangements being proposed to mortgage lenders, one such idea that we are being asked by landlords to advise upon is that of a “rent holiday”.

Such an arrangement, like many others, may seem straightforward, but unless properly considered and documented they can be fraught with potential issues.

Any landlord should require the terms of any reduction in rent, or deferment of payment, to be made absolutely clear; it will be imperative to avoid any risk that the agreement amounts to any form of waiver of the right to be paid the rent full stop.

It is equally important that it is clear throughout that the arrangement does not amount to a permanent variation of the lease (in terms of the amount of rent payable, or payment arrangements), or indeed anything which could lead to the tenant later trying to prevent the landlord from claiming the full rent due under the lease.

Any suggestion that the lease has been permanently varied might cause difficulties in recovering any shortfall in rent for the “rent holiday” period, and could further have a negative effect on any future rent review, or the level rent chargeable on a future lease renewal.

When negotiating a potential “rent holiday” with a tenant therefore, a landlord should bear in mind the following key points:

  • What is actually being agreed- a temporary reduction in the amount of rent? A suspension of payment of the rent?
  • How long is the arrangement to last? Will it be tied to a certain event occurring (for example, the lifting of the Government’s lockdown)? If it’s terminable on notice, how much notice is required?
  • Do you expect to be able to recover the rent due for the “rent holiday” period at some point in the future? With interest?

Such arrangements can usually be documented in a side letter; it is strongly recommended that you seek professional advice and drafting to ensure that the potential issues detailed above are avoided.

If you are a landlord considering the ways in which you can assist your tenants at this difficult time, or a tenant equally concerned about what can be done to reduce your liabilities under a lease,   please speak to Jonathan Rowley, an experienced Associate Solicitor in the Commercial Property team here at Ansons on 01543 466660 or email jrowley@ansonssolicitors.com