All of a sudden, many tenants are struggling with cashflow difficulties as a result of the Coronavirus. Most tenants either don’t require their premises or are unable to use them due to enforced shutdown on the grounds of public health.
Over the last few weeks we have seen wholesale closures of shops, offices and other facilities with a growing number of tenants unable to afford to continue with rental payments.
Emergency measures have been put in place under the Coronavirus (Scotland) Act 2020 to protect tenants from having their commercial lease terminated as a result of late payment of rent. This new legislation extends the notice period which landlords must give to tenants before terminating a commercial lease for non-payment of rent or other sums due. The notice period of least 14 days is now extended to at least 14 weeks’ written notice. If the tenant fails to make payment within the specified notice period then the landlord may proceed to terminate the lease and take enforcement action to evict the tenant.
These emergency measures will automatically expire on 30 September 2020. However, the Scottish Ministers may extend the expiration date for two further periods of six months. The Scottish Ministers also have the power to alter the new 14 week period if required.
Although the new legislation provides a grace period, it is important to note that the emergency legislation does not provide rent relief for tenants. Rent and other arrears will continue to accrue as usual. Landlords will be able to terminate a lease and take enforcement action to recover possession of the premises as usual once the extended notice period has expired.
Many landlords and tenants have reached voluntary arrangements about rent payments where the tenant is struggling with cash flow as a result of having to close its doors and cease operating from 23 March 2020. These pragmatic discussions will be essential to help the commercial property sector get through what is undoubtedly one of the biggest blows it has faced in recent times. Indeed, many commercial landlords have already offered rent deferrals or rent reductions until things improve.
Here at MBM Commercial LLP we are encouraging greater dialogue between landlords and tenants, as both sides try to adapt to these challenging conditions.
Please feel free to contact us to discuss your legal rights and obligations under your lease and the most suitable way for you to address the situation.