March 26th – Isolation – Day 4

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We are right into Day 4. As I am writing this my fiancé is heading out the door for a walk with my daughter. That should buy me a good hour or so of focus.

I was skimming over the internet this morning reading some of the many articles that discuss the effects of Covid 19 and happened upon an interesting post that mentioned landlord and tenants rights under their lease agreements.

There has been a lot of talk about rent reductions and holidays and the impact of businesses not able to carry out their day to day work being stuck at home. This post pointed to a couple of clauses in a standard ADLS lease which piqued my interest – see below.

No Access in Emergency

27.5 If there is an emergency and the tenant is unable to gain access to the premises to fully conduct the Tenant’s business from the premises because of reasons of safety of the public or property or need to prevent reduce or overcome any hazard, harm or loss that may be associated with the emergency including;

…..

(c) restriction on occupation of the premises by any competent authority

then a fair proportion of the rent and outgoings shall cease to be payable for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceases.

The gist of this is effectively that tenants may have the right to cease rent payments through the period of the lockdown. This is good news for tenants and not so good news for landlords.

Ceasing payments isn’t without risk though, see below;

27.6 This subclause 27.6 applies where subclause 27.5 applies and the premises or building of which the premises form part are not totally or partially destroyed….Either party may terminate this lease by giving 10 working days written notice to the other if:

(a) the Tenant is unable to gain access to the premises for the period specified in the First Schedule

This clause allows the landlord to cancel the lease with 10 working days notice if the No Access period extends beyond the period mentioned in the First Schedule of the lease. The First Schedule has a clause (15) that is a No Access Period. The standard draft lease has a term of 9 months (not so applicable here) but it can be edited so each lease may differ. If the term is 1 month then it is reasonable to assume that the landlord may cancel the lease.

I am not certain that a landlord would take this up and I would encourage anyone looking at taking this forward to both speak with a lawyer and negotiate in good faith. We are all in the same boat and it is no-one’s fault.

Another conversation that is worth having (particularly with landlords) is with your financial advisors and banks. All lenders will be aware of this and should be in a position to help. As I said, this is no-ones fault and we need to make sure we get through.

If you want to talk about it, give us a bell!