Webinar
Catch up - live Q&A: Ask the experts: Workplace, property and business leases
Catch up live Q&A: Ask the experts: Workplace, property and business leases
The government has announced new legislative changes restricting a landlord’s ability to recover rent and other sums from tenants. This includes bans on forfeiture by peaceable re-entry until 30 September, a moratorium on the issue of statutory demands/presentation of winding up petitions until 30 September, and further changes to the utilisation of the Commercial Rent Arrears Recovery process.
This recorded live, catch up session, gives an overview of the new Code of Practice to encourage productive dialogue between landlord and tenants to reach agreement on the payment of rent, ways to terminate leases if tenants are re-considering their property portfolios and consideration of some creative solutions landlords and tenants can consider to reach a mutually beneficial agreement on occupation and payment of lease sums.
Questions covered
- How can I go about terminating a lease of premises that I no longer require?
- A tenant has requested a rent free period due to COVID-19 financial uncertainty, will this impact them requiring to pay future rent?
- What can landlords do to try and encourage payment where tenants are not engaging, and no rent or other sums are being received from them?
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Webinar transcript
(Please note this is auto-generated and un-edited)
0:05
I'm Pete Dilks of Commercial Productivity, that in an era Shakespeare Martineau, welcome to today's Webinar, on an ask the expert commercial research question, and answers. I've got Justine Ball with me, who's a legal director, property litigation team, and interesting spending a lot of her time at present dealing with landlord and tenant tissues. In the current situation that we find ourselves in, Justine will be able to respond on mitigation front, towards aren't able to help maybe on some transactional issues that you may be facing or how we can document amendments.
0:42
We might need a few points on how the session will work. You'll see a little Q and A icon on your screen, so please do use that to ask questions. And nobody knows, it's going to be quite a boring Q&A session and we'll respond to them straightaway. Hopefully, if we can't get through them all and we will respond after the session. So, please feel free to start asking straight away.
1:08
I think we all thought the impact of this pandemic was going to be relatively short-lived contemporary. What our CEO is now calling. This is the new abnormal. As we all will now come to realize this isn't likely to be the case. That going to present challenges in the short, medium, and long term, and we'll do our best to answer any questions on how we can help you get through any of those periods. And we're also happy to share any of our insights, our experiences, and what we're seeing in the market President as well.
1:41
Justine will be able to talk about John, you're faced with payment of rent and the new code of practice. But we're also hearing a lot from landlords into many of you feel that perhaps any support or guidance has been way too far. In attendance favor, and we've just had the dual core today.
2:00
Although I have not got the latest figures to hand industry experts, anticipate that around 38% to grant, a loan, I believe would have been collected in June. And that's down from around 48% or today, and you're going to be in September.
2:18
So there are difficulties eliminate the residual that landlord can do present me to collect rent from their attendance. So due to the legislative changes, I think it's worthwhile for Justine just to briefly briefly explain me before we jump into the Q&A session.
2:36
Yes, They And I've had a lot of questions about this over the past few weeks and it is because there has been some very recent changes brought about by the government to strict further as landlords ability to recover and so I'll just summarize these as it might Get some more questions going The first of these Is a ban on forfeiture of commercial leases by peaceable re-entry? And that's been extended until the 13th of September The government originally ban forfeitures Until the 30th of June, but it has since been extended in an effort to protect tenant businesses. And so, because landlord can't do that now, we need to have a think about what other options you have to use as leverage to try and encourage payment from a tenant.
3:27
The second change, in summary, is that there is now a moratorium on the issue of statutory demands and the presentation of wanting petitions. So landlords can't do any of those things, until 30th of September, 2020, again, another extension from the 30th of June.
3:45
And then the final recent change that has recently been brought in is the restriction on the utilization of commercial rent raised recovery process. And that's why you could get a bailiff into the tenants premises, and take control of goods. A friend wasn't paid. So little was, you only needed seven days of unpaid rent obeying before you could send the bailiff in. And but now, that needs to be 189 days worth of rent owing, before you can utilize craw. So by way of illustration, that effectively means the whole of the March quarter needs to be outstanding. The whole of the June quarter needs to be outstanding. And some of the September quarter, so if we just looking at this recent period, the earliest you'll be able to utilize crop will be the first of October 2020, and obviously if you've got early various that date back, January December, you might be able to use Chrome now.
4:37
Justine, I'm going to delve into the questions and it may remember that a couple concerned about I want to just make a quick observation around offices Is most of this work in offices or at least it into a few months ago, and we all know officers aren't going to go away. The space requirements and configuration obesity is likely to change, and we see this as being more of a collaboration space for colleagues and staff members or for meeting times as opposed to working in the office full time in perpetuity.
5:08
You allow your seminar yesterday where they were talking across the continent and they expect maybe 15% of the working week to be spent in the Facebook. Alternately. Who knows what's up?
5:24
Has also been a bit of talk of mega more government support needed here. Maybe some of their life scheme. I've seen suggestions and landlords picking up a third of their end things picking up with a Goldman shipping in the final third. Who knows, But there's going to be a huge amount of businesses struggle to pay for six, maybe nine months rent curious as and when they're actually demanded. So, they might, they might need to be a transitional period.
5:50
It is going to hit people quite hard When realization dawns clicking into the questions and first long distances from a landlord.
6:05
My tenant has requested a 100% rent concession for the March engine quotas and no rent is paid for that period.
6:13
We've been engaged in discussions to try and reach compromise, unable to accept 100% grant concession due to commitments we have with our bank in relation to property.
6:23
Have an agreement is not yet been reached and attendings now threatening to simply not pay the rent?
6:28
I proceed to serve a statutory demand to see recovery of the rent owing. Justine probably want you to answer initially.
6:37
Yes. Yeah, good question. And sort of relates back to what? I was just summarizing, on there, being a ban on being able to utilize statuary demands. and that all stemmed from the Government's first introduction was around the 23rd of April. And we could they could not issue is actually demand or present winding up petition until the 30th of June. As I mentioned, that's now been extended until the 13th of September. And all of this is set out in the corporate insolvency and governance bill and that recently received royal assent until the 29th of June. So even though that's only just come in, and the courts are already giving effect to those terms, in the early part of January named retailer was able to escape insolvency based on these roles. So such demand will be our question at the moment. There are some queries as to whether you could service touchy demand and not rely on it until after October.
7:33
So you've already got your 21 days in, but that's something we'd have to have a look on case by case. And there are some statue demands that were already issued, and they're looking at what companies looking at, whether they can now go for winding or order.
7:45
And the governance bill does look at the test is very stringent. So, if you search such demand and you want to try and get a winding up an order, there are two things that you need to be able to prove as a creditor. So, you need to be able to prove that. The debtor has not had a financial effect on its business and that's why it should be wound up so it was unable to pay its debts anyway. Or if you can't prove that, the other thing you need to prove is the company was unable to pay its debts in any event without the impact to coronavirus on the business. So how would you go about proving that? You're going to have to get, you know, the debtors account financials, and that's just not, you know, not something that's very easily accessible by landlords. And so, unless that test is met, the Court not order winding up petition. So, I think, from my perspective, at least, issuing such demands at the moment are out of the question, just a waste of money at the moment.
8:41
But, the maybe the things that we can do, and so, again, get in touch and say, see what we can do for you.
8:49
Let's see if we've had any other questions, K, right. We've got one from a tenant, which is just good. So, on rethinking myspace requirements given the impact of Corona virus on my business. How can I know about terminating elisa premises that I no longer require? OK, so that's a good question. And there are a couple of options here. I think me I'm Pete, can contribute to this one. And from my perspective, I think the first thing you need to do is look at the leasing question and have a look at when he actually comes to an end. So it may be that it comes to an end in the next few months. Or it's already come to an end, which due to control engineer's time. And, if it does come to an end within the next few months, weeks, years, time, you won't need to serve a formal. Notice, you can just give the landlord and, sort of, a heads up as a matter of courtesy, that you'll be leaving the premises and you vacate by the contractual expiry date.
9:47
And if the contract expiry date has already ended and you have what's called a 54, at least, you may be able to give three months notice to terminate mentally. So, it's another way in which you can leave the premises and in the short term. And if the contract expiry date as many years away and have a look and see whether there's a break clause. This will be very, this will be expressing your lifestyle hidden way, anywhere, But you will need to have a look for a couple of things. The first thing is: when is the break date, and the second thing is? how much notice do I need to give, because you need to be able to give the right amount of notice to meet that break date.
10:26
So that's the first thing you need to look at, because if you, if the bright dates past, you won't be able to activate that clause. And the third thing you need to look at is the condition. So, what do I need to do in order to affect that break? one of the conditions could be you have to pay the rent, which means a tenant, you won't be able to escape paying you, and that way you'll have to pay one of the run up to the right date. Or it could be, you have to yield a vacant possession. And that will require some works, the premises and taking it back to the position was when, when you took it on. So, it may need some extra time for you to be able to put in calculations as to when you can come out. So, looking at whether when the contract expiry date of the lease. And when that comes to an end and looking at whether you've got a break clause in, your leads to see whether you can terminate that on an earlier date.
11:15
P Complicated brain clauses are our, our, our dream popular. I just do not get stuck in Cuba.
11:24
Assuming that outbreak closely, not coming towards the end to at least a couple of the things you could look at would be other assigning Subletting, your space for third party, Idaho, or particularly Subletting. Obviously, you need a winning 10 in Indiana, and the good news for those provisions on your lease will allow them usually landlords content acting reasonably, but he's still going to need some co-operation from your landlord.
11:52
The other thing you might want to look at is a surrender of either all, or part of your space, or even a nice regier.
12:00
The more complex it's more complicated route, given the that's going to lead to an unknown co-operation where they don't have to want reasonably because it's outside of the terms of the lease. But you may be surprised at the approach of a commodity or non nodal your willingness to renegotiate.
12:16
Probably recommend picking up the phone or video call, or whatever it is we're doing these days, to try and renegotiate those terms. You may be surprised at what you can get with it.
12:27
Now, suicide. When some landlords in a minute that we've come across all looking to diversify their portfolios, that might be the change. You looked up all around the world in which case you might recall amenable to a surrender to allow them to try and get planning for some of the youth. For example, maybe an office using and trying to build to rent scheme, which I'm showing it on.
12:50
The rents are withholding battling the current market, their own sailfish differential, if that's something else, and what we're looking into.
12:57
Um, let's go on to the next question.
13:04
We've heard about the Code of Practice practice, but introduced the commercial property related fee payment of rent, is that code mandatory, undue landlords, and tenants have to comply with its provisions? George is doing is putting in me. Will you again?
13:24
The government has very recently introduced it's what's known as a code of practice for commercial lease rent negotiations during the coronavirus pandemic can each do to last until next June 2021. And it's not mandatory so it's not enforceable if landlords and tenants don't comply with the terms of the code. But the government has said that it will take steps to make it mandatory if it's finding in the market that you know, that people on abiding by its terms or using it to assist the negotiations. And I think the best way to describe the code is that it's more of a framework and it has some guiding principles to help the parties showing their rent negotiation. So, it's not saying tenants, you must pay all of your rent in full across the board.
14:14
It's very much looking at individual circumstances, and where landlords can assist businesses they should, and where tenants can pay rent unsafe chart, an inch and insurance, they should be doing that, as well. It's not a case that you should be withdrawing, withholding payment of rent. And it's not the case, that language should be set, should be Grunting and Brent Concessions across the board. It's actually a framework for parties to work together to try and find some sort of negotiated settlement, which will be a mutual benefit to the parties going forward, because, in essence, what you don't want is empty units and businesses floating over across the board. So that's, And that's answered that one.
14:56
Let's, see, one of the ones come up. K, So. I'm a landlord and have been approached by my tenant to grant it event free period, is very popular at the moment, and their business has been shut down the results of the coronavirus. Should I agree to this, and will this impact on the tenant requiring them to pay future rent?
15:18
OK, so, as I said, I've been getting these probably on a daily basis, since Corona virus. The impact coronavirus hit so many businesses, and I think as I was just mentioning about the code where rent, free periods would affirm and can be agreed between the parties, and they really should be. Because it will only help both sides as we go forward to maintaining come and maintain businesses. But I think from landlords, perspectives at the moment, you should also have a look at what can you get in return. So, yes, you're agreeing to a rent concessional, or indifferent, or rent free period, but what could you ask for in return for, and fought for, giving that to the tenant? So, could, do you want to insert a landlord break further down the line or is there a tenant break clause in there that you think will? Actually, if I want, if I'm going to give you six months and frail won't allow your break when they've so I've got a bit more certainty that you will remain in the premises. Or would you prefer at least extension? So, yes. I'll give you six months rent free.
16:17
But I want six months added to the lease. So it's thinking more about the commercial side on what would be benefit, what would also benefit landlords as well as tenants.
16:28
Sorry, if you finish, you can say about issue and you're gonna get on one of those routes documenting. It can be done in various different ways. And the two most common that we see you all going to agree rent concession would be at least variation itself. Which is perhaps spend more time consuming and costly initially, but this gives certainty that this is going to bind successes and thoughtfulness and H itself has been changed. And do the option, which, to be honest, we see moral of the signed letter or sign agreements, which are cheaper and similar to put in place, but you've got to make sure they're doing the correct manner so that you're not expose it. For example, The Landlord Sonya Revision, didn't mind successor in title. It's just something to bear in mind, are the different options, and we'd be happy to talk through any of those with you, depending on various factors, including financial saving, is that we made in the first place.
17:24
And out into time, Tom, for any anymore, we'll talk a little more, maybe you've outlined watchin' as being restricted by government.
17:34
I'm sorry, that's mine, stuff going on and on. My line, if you learn IT, restricted by government recovery, home paid rent, what can landlords do to try and encourage payment? My tenants are not engaging and no renter in terms of being received at all.
17:52
Again, Justine's, probably one, is when we do no harm.
17:56
Yeah, I think that probably painting a bit of a gloomy picture for landlords saying, What you can't do, and you should negotiate, and all there. So, I think that's a very timely question to ask, is, is our last question. And I think there are some things that you can, that landlords can do now to try and encourage dialog, or encourage some sort of payment. And, I'll summarize these into three points. And the first one is court proceedings. So, that is still open to landlords.
18:25
So, if tenants are playing hardball, because they know that there are restrictions on what landlords can and can't do, you can threaten a letter before action and say, look, know, we've tried to engage with you, we want to reach resolution, but you're not coming back to us. You've left us no choice, but to issue, issue this letter, and if you don't come back to us within a certain amount of time, 14 days, for companies, I think 28 days for individuals, and then we will be issuing court proceedings.
18:50
So it's a good way to encourage, you know, something from tenants, if they have gone off the radar. Radars that haven't paid anything. And then it's up to you if you want to issue for proceedings after that. But I think it's a good, a good and firm way to get their attention again. And if you did want to issue court proceedings after that, because you weren't getting anywhere, he would be able to do that. And there are just some delays with the courts: The moment given social distancing and there's a backlog of cases but if it's right for you, we can talk to you about that afterwards. And another thing that you can think about is rent deposits. So does your lease have a rent deposit? Because if it does subject to the terms of the rent deposit, you might be able to drill down on that. And if you have responsibilities upstream that you know that you have to adhere to drawing down the rent deposit now to meet those media and responsibilities may assist you. So, have a look at whether you've got rent depositing with the control down on that.
19:45
Third thing you need to account for its guarantors and I think this is a little bit of a gold mine because I don't think people are using this as well as they could. And a guarantor is another entity that you can be ... with and be threatened recovery action against. And Yes! Some of the recovery action will be restricted as against Guarantors as against the tenants. But, you've got another party there that you can bring into the conversation to say, look, well, if you don't arrange something or if you don't engage with me, then you will be on my target list As well, either court proceedings or when the 32 september comes. That's when we'll be coming after you for recovery then. So, I think, looking at Garmin tools more as a bit of leveraging discussions to say look I've got either on the guarantor. So let's have a sensible conversation now about what we can do about about the last quarter's rent.
20:35
So, I hope that was helpful, would be anything else you'd like to Agile? Thing.
20:42
That's probably the only thing I was getting, I mentioned build to rent earlier.
20:45
And I wanted to say some bit of insight that we've had the with the new abnormal is we're referring to either the social interaction offices, and you're gonna get probably less and less people work from home. Or something that we found a few developers more interested in a social interaction that might come from a purpose built than residential schema that my student or otherwise. We'd initiatives in their development, particularly on the tech front, where they've been quite ahead of the game, I think, some, some operators. So, it's something to bear in mind, even for the office owners and operators, that getting that social interaction is going to become a more normal, key part, way up to the design, and I'm living in combination with design. So, I think we're gonna see more and more of that as, as this evolves and become a new way of life on working.
21:36
Final.
21:36
But it may be worth, OK, thanks. So, that all, that brings us to an end, to ask the experts webinar, and we hope you found it useful and relevant today, so if there's anything else that you'd like any further information on, or if you've got any other questions that you'd like answering today, and then please do, just get in touch with us. Our contact details are on the invite and things like that. Please do get in touch, and we'd be more than happy to help you anytime. We've launched a Free Helpline, giving, you direct access to a senior team of experts, so freely guidance for 20 minute, telephone, or video conference. So, check out our website. And if you do want to look at any of you the webinars we've been doing, they are all on our webpage and smart on demand. So, please do take look at those. And one very final thing, if you could just very quickly fill out a feedback form, which you will see on your screen, we'd be very grateful.
22:36
Thanks very much.
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