Why didn’t I pack the jelly babies – is often a thought I have when I recall New York City. Four months later the jelly babies did make the trip to Barcelona and at mile 21 I was glad of their company. As a runner and a solicitor, I often reflect on past experiences with a view to making improvements for success in my future.
At times like those we are currently experiencing, we should take some moments to reflect upon what we have, what matters most to us and where we wish to go. Equally, when unexpected situations occur such as now, we may find that what we previously thought as adequate in the past may not now seem fit for purpose. Now is a good time to take stock and plan for the future, with the benefit of the experience provided to us by the enforced conditions we are currently living in.
It has been said of humans, it’s not how we make mistakes, but how we correct them that defines us. The same can be said of leases, which can at times be just as complicated to understand as humans.
Prior to COVID 19 an insurance provision and insured risks in particular in a lease was relatively cut and dry. Today solicitors and landlord up and down the country are looking at such provisions with from a different perspective to check if the provision could be interpreted as rendering the property inaccessible. Which could trigger a period of rent suspension under the lease.
In addition to the above mentioned insured risks, temporary rent suspensions, rent reviews and the ability to enforce provisions against guarantors are all issues that may now need to be reviewed and are all issues which may cause Landlords and to some extent tenants’ headaches in the very near future.
But don’t fear because Jolliffes are here to help you plan and move forward so that you are in a stronger position to deal with the challenges that may face you and your business post COVID 19 because if we study the past we can help define your future.
The financial impact of COVID 19 is clear for all to see and invariably tenants may approach landlords to request a reduce rent or break in rent to help them though the current situation. If this retains the tenant, it may appear to benefit both parties but a landlord should seek legal advice before agreeing to any variation to the lease.
Effects on Guarantor provisions
The consequences of varying the lease by agreeing any variation to the rent provisions could lead to any guarantor under the lease being released from their obligations. Thus, losing the safety net provided by a guarantor should a tenant not be able to fulfil their obligations under the lease. To avoid this the guarantor’s consent should therefore always be obtained where possible before agreeing to any variations.
It would advisable to also check the wording of any guarantee provisions in your lease to see if a guarantor has given a guarantee and indemnity, consequently the landlord’s position much safer.
Effects on Rent Reviews
In a rent review clause, a common term is that the property is to be valued on the assumption that the tenant has complied with all of its obligations under the lease. If the tenant hasn’t paid rent due to agreeing a rent break or suspension this could affect the Landlord’s ability to review the rent on the date specified in the lease. This is particularly the case if time is of the essence as drafted within the clause.
To avoid any complications with rent reviews, it would be advisable to document any variation in the method, frequency of payment or amount of rent paid in a carefully drafted side letter to include all of the relevant parties.
Insurance Provisions and rent suspensions
It is common for a lease to have a rent suspension clause in cases where the premises are damaged, destroyed but what if your lease contains a similar provision whereby rent can be suspended if the property is inaccessible. In the current circumstances, COVID 19 and the subsequent government restriction may well make the property inaccessible and in turn this may trigger a rent suspension.
Consideration should also be given to whether or not a notifiable disease is included as an insured risk in the lease, as this too may also trigger a period of rent suspension under the lease.
To ensure you are prepared for the possible post COVID 19 effects on your business we would recommend checking the terms of relevant leases, insurance policy, and any landlord’s loss of rent insurance to ensure you are in the best possible position moving forward.
If you would like any further information on any of the point raised in this article or if you would like legal assistance to positively position yourself or your business post COVID19, please do contact Jolliffes and we will be delighted to work with you.
We may even share our jelly babies.