How does this impact your rental income?
A tenant’s capacity to pay rent, outgoings and other amounts payable under a lease during these times may be limited and, in some cases, non-existent.
Whilst landlords are of course facing their own pressures, it is probably advisable that they, so far as they are able, adopt a reasonable approach which may be commercially preferable to terminating a lease and ending up with empty premises.
In more ‘normal’ circumstances, a tenant does not become a ‘bad tenant’ overnight. If, for example, under the new COVID-19 restrictions a tenant is forced to close, or is limited in what it can sell, this is bound to impact upon its ability to make payments under the lease through no fault of its own.
If the landlord can accommodate temporary ‘respite’ arrangements with its tenants, such as rent holidays or rent abatement, and the tenant is able to weather the COVID-19 storm, this is beneficial to both parties in reinforcing a good commercial relationship between them.
At the same time ensuring the landlord retains tenants in place, who will recommence rental and other payments in full once we reach calmer waters.
The alternative is for a landlord to strictly enforce its lease and to terminate and re-enter the premises in the event of non-payment of rent, outgoings, etc.
This risks not only causing damage to its reputation as a landlord given the current situation, but also being left with empty premises which it is unable to rent for the foreseeable future.
An open and honest dialogue is the best way forward for both landlords and tenants.
It is important to note this information does not represent legal advice and you should seek specific legal advice for your circumstances.
This article is intended to help you understand your options and decide what is right as a commercial landlord. If you need legal advice on the specific issues facing your business as a result of COVID-19, we recommended contacting Australian Business Lawyers & Advisors.