With the continuing escalation of COVID-19 and the announcement on Sunday (29th March) that the current levels of disruption may endure for up to 6 months, there is little doubt that society is learning to adapt to a new paradigm around the way we live, work and interact.
Across the country, businesses of all complexions are seeking further clarity and reassurance from the government on the level of support they will receive and guidance on the operational parameters we must collectively adhere to.
With the Coronavirus Act 2020 coming into force, we’re monitoring the impacts and implications for landlords and managing agents. Our intention with this article is not to repeat what has already been said, but draw together some of the most prevalent points for consideration, recognising that these may be subject to change at any time given the changing nature and frequency of governmental advice - and the need for more stringent measures.
Repairs and Maintenance
Further to initial confusion, the government has stipulated that landlords remain “legally obligated to ensure properties meet the required standard – urgent, essential health and safety repairs should be made. An agreement for non-urgent repairs to be done later should be made between tenants and landlords. Local authorities are also encouraged to take a pragmatic, risk-based approach to enforcement”. In practical terms is means that urgent repairs can continue, as long as social distancing is respected, adding that no work should be carried out in any household which is isolating or where an individual is being shielded, unless it is to remedy a direct risk to the safety of the household, such as emergency plumbing or repairs. It would seem urgency is a key factor where there is a discernible risk to health and safety. At present discussion is ongoing around the best approaches to carrying out safety checks for tenants who are self-isolating. With regard to non-urgent repairs, guidance currently recommends that agreement should be made between landlords and tenants at a later date.
Rent Payments
With the introduction of the government’s remarkable plans to subsidise employers and protect up to 80% of salary income (coupled with the intervention to provide all renters 3 months’ notice if landlords intend to seek possession), the latest DCHLG holds that tenants are still liable for their rent and should pay this as usual given the protections offered. With regard to supporting landlords directly, particularly with regard to buy to let, the government is also highlighting the agreements with lenders that they will ensure support is available where it is needed for landlords. Landlords will also be protected by a 3 month mortgage payment holiday where they have Buy to Let mortgages. Overall, the common consensus seems to be that given the extraordinary circumstances, landlords and tenants should, (as feasibly as possible) seek to find common agreement on payment plans and schedules.
Terminating Leases: Commercial Considerations
There are two prevalent areas of discussion from a legal perspective with regard to whether COVID-19 renders a lease redundant or undeliverable.
From a tenant’s perspective, they could see changes to their obligations or rights as fundamentally different from those agreed - which could mean they feel their leases are “frustrated” and should consequently be terminated. But whereas short term closure would commonly be deemed insufficient to warrant frustration, (with one argument being that contingencies should be identified and mitigated between parties when the lease is drafted), the paradigm may shift within days.
Secondly there is the notion of force majeure. There is a broad consensus that force majeure clauses are difficult to apply to commercial agreements in the context of COVID-19, and the first question is whether COVID-19 will be regarded as a Force Majeure occurrence. Secondly there is the question of whether the terms of the lease provide sufficient scope for force majeure to be factored, which can be unusual for commercial arrangements.
As a footnote, leases should also be reviewed in order to identify the possible criteria and definitions around tenant break clauses or rent provisions that have been agreed which relate to the turnover of the tenant business.
Service Charge & Cost of Cleaning
Landlords should be aware that service charge schedules should cover the costs of additional deep cleaning above the nominal cleaning costs and activity included, on the basis that these can be reasonably argued given the need to preserve hygiene in communal environments and provide a safe environment for tenants or employees. It is advisable to continually review risk assessments and ensure compliance with the Health and Safety at Work Act 1974.
Access to Premises
If a landlord needs to close premises, as a precaution or in response to government guidelines, it will be necessary to revert to the terms of the lease primarily to understand the entitlement to close access to common parts. However, in following government advice, landlords may be able to carry their argument through on the tenant’s obligation to comply with the statutes, notices and orders of competent authorities and avoid claims against landlords for derogation from grant, breach of quiet enjoyment or clauses for keeping premises open.
In summary, we have to remember that as awful and uncertain as the situation currently is, it will hopefully only be for a certain period of time. Immediate priorities aside, when considering the points above it will be prudent to keep records of all contact and communication with relevant parties to the lease, including advice provided by agents, solicitors, insurers or other bodies - particularly in relation to requests and agreements made on an urgent basis, for example in response to emergency protocols. As a broad rule of thumb, revisiting the specific terms within leases should act as the primary foundation for further action and engagement. If you require any further support, please contact us.
Phil Parkinson, Legal Director at JB Leitch
