Should I stop paying my commercial rent?
Commercial leases generally prevent a tenant from withholding payments of rent. If a tenant stops paying rent there will be a breach of the tenant’s covenant to pay rent which, strictly speaking, will entitle the landlord to forfeit the lease and/or seek to recover the arrears in the courts.
However, on 23 March 2020, the Ministry of Housing, Communities and Local Government announced that all commercial tenants in England, Wales and Northern Ireland missing rent payments are to benefit from a government ban on forfeiture of their lease. This change, which will prevent landlords from terminating leases and evicting commercial tenants, is included in the Coronavirus Bill. It will come into force very shortly (once the Coronavirus Bill receives Royal Assent, which is expected to be in a matter of days) and will last until 30 June 2020, with an option for the government to extend this deadline.
It is anticipated that many commercial tenants will take advantage of the reprieve and withhold their rent. Importantly note the rules will apply not only to principal rent but to “any sum a tenant is required to pay”, leaving the burden of supplying services and insuring the premises on landlords.
It is also important to note however that the protection offered by the government is from the threat of forfeiture should tenants withhold rental payments. The liability to pay the rent however remains an interest on unpaid rents will accrue. Furthermore, remedies other than forfeiture may be pursued by the landlord e.g. service of a statutory demand before insolvency or ordinary litigation proceedings for arrears etc.. Tenants then ideally should look to reschedule or suspend rental payment through discussions with their landlord.
The advantage of this being you might be able to negotiate a sensible and manageable repayment program in respect of the suspended rent, free of the threat of litigation.
Related FAQs
The key factors for determining status for employment and tax purposes are generally the same. However there are some cases that highlight the different approaches taken by employment tribunals and HMRC when determining status. The important thing to consider for IR35 purposes is that being deemed employed for tax purposes does not mean a contractor is ’employed’. PSC’s can still be used in moving forward but there are likely to be discussions on the commercial aspects of the contractor arrangement. Employment status for tax purposes is likely to come at a cost for both parties.
No. You should always treat employees consistently and fairly, but this doesn’t mean treating them all the same, or applying the same requirements. For those employees who have been homeworking and doing so without any problems, then they should be allowed to continue to do so.
We would anticipate that the vast majority, if not all, businesses will be approaching the return on a phased basis, which inevitably means some employees returning to work sooner than others. In reality then, you aren’t treating everyone the same, but try to be fair and consistent; you need to do what works best from a business perspective, but can you rotate people, require them to come in at different times etc. Where people perceive that the planned return is being worked out fairly they are far more likely to buy into this, which will help avoid resentments building up between colleagues.
Suspension should always be a last resort and not a knee jerk reaction. We would not advise suspension unless a the above steps around the risk assessment have been undertaken. Depending on your local policies, suspension could then be an option on the basis that their health and safety and the health and safety of others are put at risk by their actions.
The guidance gives numerous examples of the types of performance adjustment which parties should consider. For example this includes:
- Varying deadlines (e.g. for performance or payment)
- Varying compensation (e.g. to recognise increased costs)
- Varying the nature of performance (e.g. allowing substitute goods, allowing pert delivery of services)
The guidance also encourages a reasonable approach to enforcement, which might encourage delaying issuing formal proceedings, increased use of mediation or providing more information to the other party than would be volunteered under normal circumstances.
Although there is no formal selection process that must be followed in order to furlough staff, the basis for selecting who will be furloughed should be explained to all relevant staff. Basing this on work levels, required skills or whether work can in fact be carried out efficiently from home will help this process. Staff can be invited to volunteer to be furloughed or re-furloughed. Any requests can be considered on a case by case basis. It may be that a particular skill set is required which may result in an employee’s request being refused.