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.

Share this article on social media

About the Author
Philip Parkinson, Partner, Head of Real Estate in Worcester and London

view my profile email me

Got a question?

Send us an email

x
Newsletter HCR featured image

Stay up to date

with our recent news


x
LOADING