Communication over rent is key in crisis
Tenants and landlords must discuss payment problems, writes Alan Mclaren
As we work our way through the once unimaginable issues we now face due to Covid-19, one of the things becoming abundantly clear in commercial property is that the need for tenants and landlords to talk has never been greater.
The nation’s response generally to the coronavirus pandemic has proven that none of us can afford to ignore our problems – and that the only way in which we will get through them is by working together, acknowledging that these are unprecedented times.
None of us should lose sight of this, including when considering potential rent payment problems. With many businesses suffering from cashflow issues because of the virus’ impact – and the next quarterly payments due on 28 May – struggles over rent will be unavoidable for some companies.
I firmly believe that tenants with worries should talk to their landlord without delay, and that any landlords with concerns about a tenant should do likewise.
Both sides will be better able to negotiate a reasonable outcome if issues are flagged as soon as they begin to emerge, rather than as payment dates pass. This may also avoid a legal dispute.
We know that in Edinburgh, for example, there are some businesses for which the festivals in the summer are a significant part of their year. They know now that these events are unfortunately not happening this year and how that will affect their income.
Legislation introduced in response to the Covid-19 outbreak – The Coronavirus (Scotland) Act – has extended the amount of time that a tenant has to settle arrears of rent and service charge with commercial landlords from 14 days to 14 weeks.
While it is only temporary, until 30 September, there is scope for the Scottish Government to extend this for up to another year.
While it prevents a lease from being terminated for at least 14 weeks after notice of arrears is given, it does not take away the tenant’s obligation to comply with its lease. This means that if a tenant continued to fail to pay rent for the whole 14-week period after an arrears notice is served, the tenants would be liable to pay the amount stated in the arrears notice, plus rent for the 14 weeks since then, along with interest and other damages.
However, whatever the law states does not remove the need for honest conversation.
It is important that everyone engages in a way which openly and respectfully explores all of the possibilities that can benefit each side.
Tenants must be honest with landlords, who may have to ask themselves, if they can’t have 12 months’ rent in the next year, could they live with eight months’ or six months? If they have someone on a tenyear lease, would they rather have nine and a half years’ rent than lose an otherwise good tenant at this time?
Agreements should be properly documented, with each side taking into account considerations surrounding insurance and what Government support may be available.
Every business is different, but none is immune to the impact of the current crisis. It is in everyone’s interest that we all work together to emerge from it as strong as we can.
Alan Mclaren is a partner at Lindsays solicitors and estate agents
“With many businesses suffering from cash flow issues because of the virus’ impact, struggles over rent will be unavoidable for some companies”