Covid tenant protection provisions – what next?
The government has introduced and then extended protection for tenants as part of the unprecedented provisions to soften the impact of Covid-19.
This principally means that, until 30 September 2020, to recover rent from a defaulting tenant, landlords cannot resort to the usual steps of commencing recovery proceedings, forfeiting the lease or applying for wind up proceedings.
We briefly consider what is likely to happen after 30 September:
- We think it unlikely that the current protection will be extended.
- Therefore, some landlords will start proceedings against tenants who are financially sound but have failed to pay rent.
- Where practical, parties will negotiate variations to existing lease arrangements such as:
- extending the lease term in return for a rent deferral or rent reduction;
- removing tenant break options;
- granting landlords a break option; and/or
- surrendering part of the demise.
- On new leases, the average length of the lease term may reduce further to give tenants greater flexibility and reduced exposure.
- Insurance provisions may be negotiated more closely and the extent and cost of cover to include pandemic protection discussed further.
- Planning restrictions on changing retail use and using outdoor spaces may be softened so that cafés and restaurants can use forecourts/pavement spaces for trade.
- Planning provisions may be put in place to aid the move from retail spaces in city centres to alternative uses such as leisure and residential.
- Businesses may increase investment in IT to ensure working from home options work efficiently.
It will be interesting to see how things evolve over the coming months, especially as we prepare for winter with the anticipated second wave.
In the bigger picture, what we can see is that Covid is actually speeding up many of the changes that have been happening anyway.
Whilst there will be pain for many, these changes will create many opportunities too.
If you would like more information on any of the above, please email or call us on 0113 227 9344 today.