The Rise of Rent Suspension Clauses in Commercial Leases
Posted on October 26th 2020
With further restrictions looming due to the rise in COVID-19, Oliver & Co Solicitors have seen an increase in the number of tenants requesting the inclusion of a Rent Suspension Clause in their new commercial lease.
What is a Rent Suspension Clause?
A Rent Suspension clause suspends or reduces the payment of rent if the government imposes restrictions to prevent the spread of COVID-19 which result in tenants not being able to use the property for the use permitted by the lease.
Advice for Tenants
Whilst many Landlords have been reasonable in re-negotiating the payment of rent during the pandemic, some tenants have received demands for full rent as per the terms of the lease despite not being able to utilise their property.
Following the latest government announcement, it is unlikely that the current Covid 19 restrictions will ease in the near future. However, under Section 82 of the Coronavirus Act 2020 landlords are currently only prevented from exercising rights of re-entry or forfeiture until the 31st December 2020. We will have to wait and see whether there is further government action to extend these provisions
Many modern leases only allow for the suspension of rent if the premises have been physically damaged. It is therefore important that tenants looking to take a new lease of a commercial property mitigate their risks by considering the inclusion of a rent suspension clause to cover not only COVID-19 but any future pandemics.
A rent suspension clause can be drafted so that rent is suspended or reduced during any period where the tenant is prevented from using the property due to restrictions imposed by the government in order to prevent the spread of a virus. Tenants may also wish to request the clause covers service charge payments and insurance contributions.
Advice for Landlords
It is likely that landlords will resist the inclusion of such a clause in new commercial leases. We recommend landlords and tenants build a professional relationship and work together to find a solution that would be beneficial for both parties.
We recommend landlords try to limit the scope of the clause, some suggested limitations we can help you to negotiate are as follows:
- We can ensure that rent is only suspended or reduced when the tenant is prevented from using the premises for the use permitted under the lease;
- We can help you negotiate on the amount of rent that will be suspended; and
- We can draft the clause so that the rent is deferred rather than waived completely.
How can Oliver & Co help you?
Whether you are a tenant looking to take a new lease or a landlord granting a lease, our specialist commercial property solicitors can help you negotiate a rent suspension clause that will benefit you.
Due to the current Covid 19 restrictions we are unable to meet clients in person and instead our solicitors are able to conduct meetings online through a variety of video conferencing platforms or indeed via telephone conference which means that there is no need to travel or be local to Chester if you are seeking access to efficient and cost effective advice.
If you would like to make an enquiry, please contact us by telephone on 01244 312306 or by email at email@example.com.
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