What rights do you have as a commercial tenant?

Tenants and landlords alike have been worried about paying and collecting rent. It shows in the figures: the pub/restaurant sector was the lowest of all property sectors, with only about 10% of rent received in the period from March to June compared with about 80% in the industrial sector.

It has been mixed with some happy to share the pain, and offer a rent-free period or a reduction of, say, 50%. But others either can’t or won’t consider rent concessions during the closures.

They can offer a rent-free period in return for a commensurate lease extension or a reduction in rent which is then paid back over a period of years. A landlord could offer a rent-free period or lease extension if the tenant agrees not to operate a break clause they have coming up in the next couple of years.

Often this work can be done on your behalf by a surveyor in return for a percentage of the savings/concessions made. There is certainly no obligation for a landlord to offer a concession, but many realise that without one, a company may become insolvent and then they won’t receive any money and be faced with being charged empty rates. Compromise is usually the wisest move for everyone in the long run.

Through various landlord and tenant organisations, a draft Covid-19 Code of Practice for commercial property has been written “to set out principles of behaviour and responses to difficulties experienced by businesses in order to share the property-related costs and business risks of the Covid-19 crisis in a proportionate and measured way.” It is a voluntary code based on good practice for both landlords and tenants. But, as it’s not law, it relies on negotiation between the parties.

What you can and can’t do in a property you occupy is governed by the lease. ‘Non-structural alterations’ are often allowed to be undertaken without asking permission. Most of the signage and movement of tables will not be permanent and therefore will be allowed. More extensive work could require permission from the landlord and so it is best to communicate with them if you are concerned.

We hope the relationship between landlords and tenants will become less confrontational. This may happen because ‘turnover rents’ become more acceptable – these rents are usually a mix of a ‘base’ rent and a turnover-based top-up – and allow tenants and landlords to share the risk, and the good times. Landlords will have to be less passive when it comes to improvements and tenants will have to share their turnover data, but the advantages will hopefully benefit all parties.