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Insights

Key considerations for tenants following the coronavirus pandemic

Posted on 17th June 2022 in Property Litigation, Dispute Resolution, Coronavirus Pandemic

Posted by

David Paull

Senior Associate & Solicitor
Key considerations for tenants following the coronavirus pandemic

The pandemic has resulted in significant change to the workplace and many businesses are now considering what model works best for their future whether that is a full time return, working from home or a hybrid approach. We set out the key things to consider below.

 

Checking for break clauses

Tenants should review their leases to see if they have break clauses coming up. Exercising a break can be a quick and inexpensive way of ending a lease. However break clauses can sometimes require tenants to comply with conditions such as paying all sums due under the lease or carrying out repairs to put the premises into the required condition in order to ensure that the break is effective. There have been several cases where disputes over the validity of break notices have gone to court given that the break clause requirements have to be strictly complied with including the method of service or even if the right colour paper has been used! It is therefore advisable to obtain legal assistance to ensure that the requirements of the break clause are satisfied to avoid an expensive dispute arising and the risk of a break notice being ineffective.

 

Check term expiry dates on leases

The first thing to check is whether your lease is protected or not protected under the Landlord and Tenant Act 1954 (“the Act”). Protection means that a tenant has a right to “hold over” after the expiry of the term and continue as a tenant and an automatic right to seek a renewal of the lease by serving a section 26 notice under the Act which can only be opposed by a landlord (assuming they wish to oppose) under certain grounds which are set out by the Act. A section 26 notice will bring the tenancy to an end and may result in court proceedings and therefore the pros and cons of such a step should be weighed up before notice is served and it is worth bearing in mind that a new lease can be renegotiated without the need for notice to be served. Serving notice however can be a useful tool in forcing the issue if the landlord will not engage.    

If the lease is not protected by the Act as it has been “contracted out” by following the statutory procedure then a tenant should vacate on or before the expiry of the term of the lease. It is therefore advisable to regularly review when your leases expire and look to discuss renewal or vacating within say 6 to 12 months before expiry where appropriate and depending on market conditions.

 

Surrenders

It is always worth bearing in mind that a surrender can be a very cost effective and quick way of bringing a lease to an end. Any negotiations should be conducted on a “without prejudice and subject to contract” basis. The viability of finding an alternative premises is best determined by a conversation with your property agent if you wish to relocate your business. It is worth bearing in mind that a surrender has to be mutually agreed and is best documented in writing. If legal assistance is needed on the proposed terms for any surrender or in documenting it then please contact our property litigation team.

 

Forfeiture

The pandemic resulted in legislation that protected tenants from forfeiture by peaceable re-entry due to rent arrears. That has now changed with the Commercial Rent (Coronavirus) Act 2022. If the arrears accrued during lockdown they are known as “protected rent debt” and if agreement cannot be reached over payment then the dispute can be taken to arbitration. However if the arrears accrued after lockdown ended landlords can once again forfeit the lease by peaceable re-entry. We would therefore strongly advise that tenants seek legal advice immediately if they are at risk of forfeiture.

Commercial rent arrears and protected rent dept in the post-covid era

 

How can Tozers help?

For further help or information about anything mentioned in this insight, or to talk to one of our dedicated  team, please contact us.

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