COVID-19: commercial tenants will not be evicted, but what about landlords?

Last night’s announcement that commercial tenants will not face forfeiture of their leases on the grounds of non-payment of rent for the next 3 months or so (and quite possibly for longer) due to coronavirus has given tenants up and down the country a breathing space: they know they cannot be evicted from their premises if they are unable to pay their rent.

This measure is intended to operate only as a suspension of the landlord’s right to exercise its right to bring the lease to an end on the grounds that the tenant is in rent arrears.  In the present circumstances, where the mantra that “cash is king” has never been more apt, it is likely to be read as a right for tenants to stop paying rent for the defined period (albeit the obligation to pay will arise again at the end of the relevant period).

This is, for tenants at least, undoubtedly a welcome intervention particularly as for many their quarterly payment of rent is due today 25 March.  But what about landlords?  If tenants stop paying rent, landlords’ cash flow dries up and they may be unable to meet continuing running costs or interest payments on the loans secured against their properties.  Landlords’ insurance policies may pay out in some cases, but many policies link loss of rent insurance to damage to or destruction of the property itself and so will not assist landlords.

It remains to be seen what, if any, further measures will be enacted by the government which might provide a degree of comfort to landlords of commercial properties, but it does seem that some are needed.

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