by Claire Miller – Partner, Head of Property, Penman Sedgwick LLP

Most commercial leases require the tenant to pay the annual rent due to the landlord in advance by four equal quarterly instalments during each year of the term, usually on the ‘traditional’ quarter days (25 March, 24 June, 29 September and 25 December), although some leases refer to payment on the ‘modern’ quarter days (1 January, 1 April, 1 July and 1 October).

Either way, if you are a commercial tenant it is quite likely that just as you have been getting to grips with the current restrictions that have been put in place to control the spread of the virus a significant payment fell due under your lease – and it is quite likely that the economic impact of the COVID-19 pandemic will still be playing out when the next payment falls due in a few weeks’ time. Cashflow pressures are a concern for any business – what should you do if you suddenly find that you cannot pay your rent?

This is clearly a concern for both the landlord and the tenant. In this time of crisis many parties have already had to make decisions (or are about to do so) about whether a short term rent concession might be agreed, and if so on what terms. It is important (if future disputes are to be avoided) that any rent concession is properly documented and there is a lot to consider when doing so.

For example: How long will the concession last? Is it purely a personal arrangement between the parties? Is the rent simply being deferred, or are the payment dates being amended? If so, can the landlord charge interest? Or is the landlord agreeing to waive the rent for a specified period? How does the rent concession impact on any security the landlord might hold, such as a rent deposit or a personal guarantee?

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