Can I enact a rent suspension clause in my commercial lease?
Most rent suspension clauses in commercial property leases are unlikely to come to the assistance of the tenant. These clauses normally apply only where the premises has suffered substantial physical damage and are, as a consequence, incapable of being occupied, used or accessed. The coronavirus pandemic does not involve any physical damage to a property, loss from the crisis will be purely financial. Such losses then will not be covered by the landlord’s buildings insurance policy in a way that will allow a tenant to claim rent suspension.
Related FAQs
Employees will be reluctant to take unpaid leave or a sabbatical but when faced with the alternative prospect of redundancy may give it some serious consideration. This would remove the cost of that employee from the employer’s business for an agreed period of time. This is an option which can be offered to employees but again, imposing it without agreement creates significant risk.
On Tuesday 23rd June, partner Emma Digby was in conversation with Steve Hamstead and Mark Smith from AON along with Ward Hadaway commercial lawyer Nathan Bilton in a webinar titled Can trade credit insurance help to keep the supply chain moving?
The insurance market is under untold pressure as a result of the pandemic, and in such times there is a risk that insurers will cancel or reduce credit lines, particularly in certain high risk sectors such as retail. However the Government has stepped in to effectively underwrite the existing trade credit insurance agreements, and to keep trade supplies moving. Will this be enough?
In this webinar, we discussed:
- the Government backed scheme and how it will operate
- the prospects of obtaining insurance going forward, and whether it will become too cost prohibitive
- could the new legislation put your business at risk and jeopardise your insurance cover if you cannot cancel a contract when you are not getting paid for your goods or services
- the Brexit effect, and how this will affect the insurance market
- protecting your business with proper risk assessment processes and paperwork
The Government acknowledges that there may need to be some flexibility to enable developers to meet any existing s106 obligations, in particular financial contributions, during the current health crisis and in recent guidance it encourages Councils “to consider whether it would be appropriate to allow the developer to defer delivery”. However, the Government considers that the existing arrangements for varying a section 106 agreement by way of a deed are sufficient and will not be legislating for any additional temporary mechanisms.
In the absence of any formal variation, the Government does however advise Councils to take a “pragmatic and proportionate approach” to enforcement of planning obligations at the current time.
The Government’s advice does not refer to concerns over the quantum of any planning obligations but is concerned only with the timing for delivery. However, the viability behind many sites is likely to change as a result of temporary site closures, or the availability of construction materials and labour once sites can re-open. Where there is already a s106 agreement in place, a developer may wish to renegotiate their position on the basis that certain planning obligations are no longer affordable.
Where a s106 agreement was entered into longer than 5 years ago, an application can be made to the Council to formally vary a planning obligation that is now “without purpose”. Any refusals can be appealed to the Secretary of State.
Where a s106 agreement was entered into within the last 5 years, the agreement can only be modified with the agreement of the Council. The ability to renegotiate a s106 agreement will therefore come down to the willingness of the Council to accept the revised viability position. Where Councils are willing to consider this, a robust viability assessment agreed with the Council is likely to be needed.
As we move to look at re-opening businesses and getting people back into the workplace there is work to be done by employers, firstly in planning how they are going to do this, and secondly, communicating those plans to staff. The only way in which businesses are going to be able to manage the transition back to some form of normality is by speaking to their staff and re-assuring them about the measures that will be put in place to safeguard their health and safety in order to enable them to return. Any successful return to work will need to based on carefully thought out plans and providing re-assurances to employees that necessary action is being taken.
Employers will be focusing on:
- How do I get my workforce back safely, and
- How do I give my workforce the confidence to return.