EXECUTIVE REPORT
Contractor pumps
pumping to a ‘HIRE’ level
Landlord problems
Adam Bernstein spoke to Asia Munir in the Real Estate Litigation Team at law firm Walker Morris for advice.
We’re living in unprecedented times where businesses are finding their ability to pay bills, in particular rent, curtailed. Adam Bernstein spoke to Asia Munir in the Real Estate Litigation Team at law firm Walker Morris for advice.
One question that Munir is being asked repeatedly is whether a tenant can refuse to pay, defer or pay less rent. In response she says that “the terms of your lease govern whether you are able to suspend rent payments, though this will be unlikely. Strictly speaking, your landlord is still entitled to continue to demand rent.”
However, she says that your landlord might be flexible; after all, if a tenant goes to the wall, they will get 100 percent of nothing. Even so, as Munir points out, “there is nothing to legally require your landlord to reduce the rent or to agree to a deferral, however a reduction in rent could be negotiated between the parties.” Help she has seen involves a landlord drawing on rent deposits in order to alleviate cash flow issues for tenants.
The government is doing its best and the newly passed Coronavirus Act 2020 provides a temporary safety net for tenants as it introduced emergency legislation to protect commercial tenants from being evicted due to non-payment of rent until 30 June 2020.
Munir highlights section 82 of the Act. It, she says, “applies to ‘relevant business tenancies’ and prevents the landlord from effecting a right of re-entry or forfeiture for the non-payment of ‘rent’ during the ‘relevant period’.”
To explain, Munir says that the ‘relevant period’ means the day after the Act was passed and ending on 30 June 2020, or a later date if extended; ‘rent’ has been broadly drafted to include not only the unpaid yearly rent, but also any other sums payable under the lease.
She warns, however, that “the Act does not prevent a landlord from seeking to forfeit a lease on the basis of any other breach giving rise to re-entry or forfeiture.”
It should also be remembered that section 82 confirms that rent will continue to accrue together with interest; and any steps taken by a landlord will not waive the breach for non-payment of rent. Munir notes that “tenants should bear in mind that those sums will ultimately still need to be paid.” She adds that in the absence of any further extension of the relevant period a landlord's entitlement to forfeit premises will be restored after 30 June 2020.
Where a landlord has already commenced possession proceedings for non-payment Munir says that “the Act also contains provisions for dealing with this.” She says that under section 82, “until at least 30 June 2020 premises will not be repossessed by the landlord.”
Lastly, Munir’s been asked if a lease can be terminated early through a tenant seeking to exercise a break clause. Her answer is that a lease will outline when a break is exercisable and any conditions attached to it; adding, “it is important that any conditions are strictly complied with in order to effect a break option.”
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