Should I stop paying my commercial rent?
Commercial leases generally prevent a tenant from withholding payments of rent. If a tenant stops paying rent there will be a breach of the tenant’s covenant to pay rent which, strictly speaking, will entitle the landlord to forfeit the lease and/or seek to recover the arrears in the courts.
However, on 23 March 2020, the Ministry of Housing, Communities and Local Government announced that all commercial tenants in England, Wales and Northern Ireland missing rent payments are to benefit from a government ban on forfeiture of their lease. This change, which will prevent landlords from terminating leases and evicting commercial tenants, is included in the Coronavirus Bill. It will come into force very shortly (once the Coronavirus Bill receives Royal Assent, which is expected to be in a matter of days) and will last until 30 June 2020, with an option for the government to extend this deadline.
It is anticipated that many commercial tenants will take advantage of the reprieve and withhold their rent. Importantly note the rules will apply not only to principal rent but to “any sum a tenant is required to pay”, leaving the burden of supplying services and insuring the premises on landlords.
It is also important to note however that the protection offered by the government is from the threat of forfeiture should tenants withhold rental payments. The liability to pay the rent however remains an interest on unpaid rents will accrue. Furthermore, remedies other than forfeiture may be pursued by the landlord e.g. service of a statutory demand before insolvency or ordinary litigation proceedings for arrears etc.. Tenants then ideally should look to reschedule or suspend rental payment through discussions with their landlord.
The advantage of this being you might be able to negotiate a sensible and manageable repayment program in respect of the suspended rent, free of the threat of litigation.
Related FAQs
Partner at Ward Hadaway Adrian Ballam talks to corporate finance expert and CBILS specialist Chris Silverwood (CorpFin and cashflow.co.uk) to explore the practical ins, outs, dos and don’ts of CBILS applications, answering the questions:
- How are banks making their assessments of whether a business can afford a CBILS loan when for many they cannot accurately forecast their revenues for at least the next three months?
- What are the red flags that banks are looking for when assessing whether or not to grant a request for a CBILS loan?
- What cost mitigation measures should a business have already implemented prior to applying for a CBILS loan?
- What level of information should a business provide to support a CBILS application?
- What common mistakes are businesses making when applying for funding?
- What general tips do you have for businesses seeking CBILS funding?
Click read more to view the video.
The recommendation is every 3 years, however it is recommended that MHFAs receive regular ongoing training and support.
All employers have a duty to prevent illegal working, and carrying out proper Right to Work checks are a fundamental part of this. In light of Covid-19, the Home Office has brought in some temporary measures for employers to use to carry out the requisite Right to Work checks. Failure to follow these could lead to enforcement action and penalties.
Lenders implementing the Scheme can assist in a number of ways, including:
- Term loans
- Overdrafts
- Invoice finance
- Asset finance facilities
The maximum value available under the scheme is £5m, with repayment terms of up to six years for term loans and asset finance. Overdrafts and invoice finance facilities will be available for up to three years.
Cancellation insurance usually covers certain expenses and loss of profit, as long as the reason for cancellation is not excluded. These exclusion clauses are often quite wide and exclude avian, swine flu, quarantine, and restrictions of movement as a result of communicable disease. This means that you may not be entitled to compensation under this cover.