Landlords worry about COVID-19 impact on commercial properties

Maureen Ihua-Maduenyi

Commercial landlords are increasingly concerned about the economic impact of the coronavirus pandemic on their tenants and property portfolio, a new report has said.

The report quoted a commercial property solicitor, Paul Hinchliffe, to have said he had been approached by landlords asking for advice on how they could balance their own books while their tenants were struggling due to enforced closures.

He said, “A lot of landlords are finding they have to accept the current situation and hope it doesn’t take too long to clear.

“However, commercial landlords need rent money to keep their own businesses afloat. So, we’ve recommended that, while landlords should accommodate rent reductions, they should continue to demand rent in the usual way, while refraining from waiving their right to collect unpaid rent at a future date.”

Propertywirecom reports that where a company cannot pay its bills due to the coronavirus, the UK government has temporarily banned the use of statutory demands (made between March 1 and June 30, 2020) and winding up petitions (presented from Monday April 27 to the end of June).

It added that the government had introduced secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords from using Commercial Rent Arrears Recovery  – unless they were owed 90 days or more of unpaid rent.

Hinchliffe said he had laid out some steps landlords could take in order to manage cash flow during the coronavirus pandemic.

He said, “They should check their rent roll – it’s likely that retail and leisure tenants are going to be hardest hit, so they should prioritise monitoring those tenants. Landlords should analyse whether they have let things slip and need to make a choice about whether they call debts in more formally, or consider speaking to a solicitor about what action they can take.

“Lease arrangements should be reviewed, looking at whether tenants are companies or individuals. Companies may be more immediately at risk of insolvency events, so landlords may want to prioritise debt collection from those tenants.

“They should talk to tenants, to see they could make changes like moving payments from the usual quarter days to monthly arrangements, or agree a short-term rent referral. Banks should be consulted, to assess options like payment holidays.”

He said landlords could also get in touch with a solicitor, who might be able to help in reviewing leases and contractual arrangements.

He explained that it might be worth it for landlords to pause before making a choice, as the situation was unprecedented and it could be too soon to make a decision about a property portfolio and tenants.

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