Laceys tips when considering a rent reduction during coronavirus
15th June 2020 by Rob Kelly
Commercial and residential tenants who miss rent payments due to the impact of the coronavirus pandemic are now protected from eviction until at least 23 August 2020.
Landlords and tenants may want to agree a change in the rent payable under a tenancy agreement, but a change which is incorrectly documented, or not documented at all, could significantly affect the parties’ rights and obligations. This could be particularly important, for example, if there is a guarantor of the tenant’s liabilities and obligations so as to ensure that the guarantor is not relieved of their guarantee obligations.
So what factors should be taken into account in order to properly document such changes? Among them are the following:
- Does the reduction in sums payable by the tenant cover rent only or does it also include service charges?
- Is the reduction to be a deferral (so that the full rent / service charge remains payable at a later date) or a holiday (i.e. a waiver of charges for the agreed period)?
- If some or all of the sums are to be waived, are they to be capable of being claimed in full by the landlord if the concession is terminated due to a breach by the tenant?
- Ensure the letter is personal to the tenant so that if the tenancy is assigned the letter will cease to have effect.
- Ensure that any rent review which occurs during the period of reduced rent will be calculated in accordance with the provisions of the tenancy and will not take account of the terms of the letter.
- Although the Coronavirus Act 2020 prevents a landlord recovering possession until 23 August 2020 where the ground for doing so is the non-payment of rent, are the landlord’s other options for responding to a breach of covenant to be preserved?
- If the tenancy provides for the payment of interest on rent / service charge paid late, is there to be a deferral or suspension of that interest?
These are just a few of the numerous issues that should be considered if a change to the obligations to pay rent or service charges are to be implemented. Each situation should be considered in the light of the terms of the particular lease, and any letter recording the agreement should be drafted accordingly. The parties are therefore encouraged to seek legal advice before agreeing to or implementing the terms of any such letter.
Laceys Solicitors provides specialist services in landlord and tenant law. If you would like any further advice on drafting changes to tenancy agreements, please contact Rob Kelly by email or 01202 755217 who will be happy to help.