HCR Law Events

19 March 2020

Are you failing to pay your business premises rent?

Business downturns caused by the Coronavirus pandemic are all over the news – what should you do if you can’t pay the rent on your business premises because your cash flow has been hit?

The key action points are:

  • Talk to your landlord to see if you can negotiate a rent-free period
  • Talk to your lender to explore ways of increasing liquidity
  • Consider restructuring for the longer-term.

How can your landlord help?

If you have a reasonable relationship with your landlord, that will stand you in good stead now – they may prefer to keep some income coming in from the property, rather than have it empty or on the market in the current climate.

A negotiated settlement is, therefore, a good way forward for both of you – you should consider:

  • An agreed rent free or holiday period of one or two quarters in return for a fixed higher rent the following year
  • A rent free period in return for a longer lease being agreed or perhaps break clauses being removed to give the landlord more certainty of income, once the crisis has passed
  • A rent free period just to keep you in occupation – you would still be liable for the rates and the building’s security.

Can we be evicted?

If your landlord is not willing to negotiate a settlement and won’t agree to any rent reduction, this might leave you no way of paying the rent. The landlord is then in a position to enforce their rights to forfeit the lease and charge default interest. If you’re having genuine cash-flow issues, this may be sufficient for the landlord to recover possession.

But this could be a negative move for them – tenants may not be queuing up to take the lease on in the current climate.

What are my final options if the negotiation doesn’t work?

You have several options – the most positive are:

  • Liaise with your lenders on a new bailout, including a swift and comprehensive review by professionals to find a way forward
  • If you haven’t already done so, consider creating a separate property company and operating company structure and transfer your business at current value.

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About the Author
Philip Parkinson, Partner, Head of Real Estate and Property Development

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