Covid-19 update – Guidance for tenants of business properties
The Government’s response to the ongoing Covid-19 outbreak is developing day-by-day, and already there are important measures of which tenants of business properties should be aware. With the first quarter’s rent due last week (24 March 2020) for many tenants, this could be important to those who find themselves facing cashflow difficulties.
So what do business tenants need to consider during Covid-19:
1. Talk to your landlord
Landlords may themselves be facing significant impacts of the Covid-19 outbreak. For example, in meeting commitments to their funders. Sensible conversations need to happen for landlords and tenants to find a way through this that keeps both businesses intact.
2. No eviction for commercial property tenants
In a measure recently announced, tenants of commercial premises unable to pay their rent as a result of the Covid-19 outbreak will not face eviction. A similar measure had previously been announced for residential tenants but this will now be extended to commercial tenants through the Coronavirus Act 2020. The measure will mean that no business tenants will be forced out of their premises if they miss a rent payment in the next three months.
3. Can alternative rent payment arrangements be agreed between commercial landlords and tenants?
As part of the discussions, consider whether the landlord would be prepared to grant a concession to allow rent to be paid monthly for the next one or two quarters. Alternatively, would a landlord be prepared to postpone this quarter’s rent. Whilst they may do so, they may still want the quarter’s rent paid at an agreed later date (or by instalments from an agreed date).
4. Would the Government’s Business Interruption Loan scheme assist commercial tenants?
The Government has now issued further details about its BIL scheme. Be aware that this will be administered through the banks, so implementation is likely to vary across the lenders. What we do know is that loans are available from £25,001 to £5m but will be limited to a maximum of 25% of 2019 turnover or double the annual wage bill (whichever is greater), and that they will need to be backed by personal guarantees (with loans over £250,000 also to be backed by other tangible security). Loans can be taken out for terms of up to 6 years with no interest to pay for the first 12 months (and with capital repayment holidays for 12 months also available). It is important to note therefore that these are loans that are repayable by the borrower, but do give access to cash.
5. Might one of the Government’s grant funding schemes assist commercial tenants?
The Government has now announced two new grant funding schemes to help certain businesses through the current outbreak: the Small Business Grant Fund (SBGF); and the Retail, Hospitality and Leisure Grant Fund (RHLG). These are schemes that will be administered by Local Authorities.
The Small Business Grant Fund (SBGF)
Under the SBGF, all businesses in England in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief (RRR) in the business rates system will be eligible for a payment of £10,000 on meeting certain eligibility criteria.
The Retail, Hospitality and Leisure Grant Fund (RHLG)
Under the Retail, Hospitality and Leisure Grant Fund (RHLG), businesses in England in receipt of the Expanded Retail Discount (which covers retail, hospitality and leisure) with properties that have a rateable value of less than £51,000 will be eligible for the following cash grants per property:
- eligible businesses with a property that has a rateable value up to £15,000 will receive a grant of £10,000, on meeting certain eligibility criteria; and
- eligible businesses with a property that has a rateable value of over £15,000 and less than £51,000 will receive a grant of £25,000, on meeting certain eligibility criteria.
There are complex eligibility criteria and rules as to applicable properties. More information can be found here
6. Can a rent holiday be agreed?
This is what some leading retailers have been calling for. Many High Street stores are withholding rent payments that were due on 24 March (knowing that they can’t face forfeiture of their lease for the next quarter) saying that delaying the rent is not really going to help them and that it is a short term rent holiday that they need to ease cashflow. Whilst such an arrangement may appear unlikely, many landlords may be prepared to agree in the longer term interests of keeping their tenants.
7. Check your insurance policy
With Covid-19 being a notifiable disease then it may be that business interruption insurance will pay out for rent, so check your policy.
If you are concerned about any issues relating to your use and occupation of commercial property during this Covid-19 outbreak then contact Stewart Gregory e. email@example.com t. 01273 766930.