Commercial landlords worried about economic impact of Covid-19

21 May 2020 | General

Commercial landlords are increasingly concerned about the economic impact of the coronavirus pandemic on their tenants and property portfolio, Paul Hinchliffe, commercial property solicitor at Nelsons said.

Hinchliffe has been approached by landlords asking for advice on how they can balance their own books while their tenants are struggling due to enforced closures.

He said: “A lot of landlords are finding they have to accept the current situation and hope it doesn’t take too long to clear.

“However, commercial landlords need rent money to keep their own businesses afloat, so we’ve recommended that, while landlords should accommodate rent reductions, they should continue to demand rent in the usual way, while refraining from waiving their right to collect unpaid rent at a future date.”

Where a company cannot pay its bills due to the coronavirus, the government has temporarily banned the use of statutory demands (made between 1 March and 30 June 2020) and winding up petitions (presented from Monday, 27 April to the end of June).

The government has also introduced secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords from using Commercial Rent Arrears Recovery (CRAR) – unless they are owed 90 days or more of unpaid rent.

Hinchliffe has laid out some steps landlords can take in order to manage cash flow during the coronavirus pandemic.

They should check their rent roll – it’s likely that retail and leisure tenants are going to be hardest hit, so they should prioritise monitoring those tenants.

Landlords should analyse whether they have let things slip and need to make a choice about whether they call debts in more formally, or consider speaking to a solicitor about what action they can take.

Lease arrangements should be reviewed, looking at whether tenants are companies or individuals. Companies may be more immediately at risk of insolvency events, so landlords may want to prioritise debt collection from those tenants.

They should talk to tenants, to see they could make changes like moving payments from the usual quarter days to monthly arrangements, or agree a short-term rent referral.

Banks should be consulted, to assess options like payment holidays.

It could also be worth getting in touch with a solicitor, who may be able to help in reviewing leases and contractual arrangements.

Lastly it may be worth it for landlords to pause before making a choice – seeing as this is an unprecedented situation and it could be too soon to make a decision about a property portfolio and tenants.

This post has originally been featured in Property Wire.