COVID 19: Managing Landlord-Tenant Relationships

Landlords and tenants alike are under extreme pressure to maintain their obligations under commercial lease terms during the COVID-19 pandemic. Restrictions have been placed on landlords' remedies under the Coronavirus Act 2020 and the Coronavirus (Scotland) Act 2020, and further regulation is anticipated in the weeks to come. While government reliefs are available, many tenants are seeking concessions to help them survive during the lockdown, and beyond.

To help you navigate safely and effectively through these requests, and to help sustain cooperative landlord-tenant relationships, we have prepared a checklist of issues for landlords to consider.

While we have strived to cover all the most pressing considerations for landlords, there will, of course, be case-specific issues that this checklist may not address and our real estate lawyers are available to support you in making these decisions.

Preliminary considerations

Lender consent: do you require lender consent before agreeing to concessions? Loan obligations: do your loan documents contain obligations regarding income cover that might be prejudiced by concessions? Interest servicing/dividend cover: consider whether and how concessions on rent payment might prejudice interest servicing or dividend cover. Authority regarding portfolio management: if you manage portfolios for third parties, do you have sufficient delegated authority to offer concessions? Reputation management: even if you do have sufficient delegated authority, consider sense-checking your strategy with your client on granting/not granting concessions. Landlords may face direct public criticism from struggling tenants. Other third party consents: check whether other third party consents may be necessary. For example, if you are a tenant under a head lease and consent is required to vary under/sub leases. Head lease obligations: if you grant a concession to your tenants, can you continue to meet the rent under the head lease? Multiple tenants: if you are letting your property to multiple tenants, news of a concession to one is likely to spread, with pressure to offer concessions to others. Consider up-front how you will apply your policy to support those who will need it to continue to pay rent to you in the future, while avoiding void rates, service charge and insurance. Turnover rent: tenants who are liable to pay pure turnover rent without any minimum threshold may feel suitably cushioned from the impact of current...