Real Estate Tip of the Week: Covid-19 Lease Considerations

Published 18 mayo 2020

As the UK’s lockdown continues, many landlords and tenants are actively engaged in negotiations around the variation of, or concessions relating to, the terms of any occupational leases.

Whilst, naturally, the main focus of such negotiations centre around rental concessions, there are potentially a number of other clauses in a lease that may need to be considered in the context of the current or future lockdowns:

• Should the closure of the premises by the tenant be expressly excluded from any ‘keep-open’ covenant, and should any such closure be carved out of any liquidated damages provisions for breach of the 'keep-open' covenant?

• Similarly, should any closure of the building by the landlord be carved out of the landlord’s covenant for quiet enjoyment, to avoid any potential claim for derogation from grant by the tenant?

• Should the tenant be relieved of any obligations to notify the landlord of any period of closure of the property due to coronavirus?

• Should the landlord be relieved of the obligation to provide all but the core services under any service charge regime and what are the core services (eg security, heating etc)

• If the tenant is currently benefiting from a rent free period, should this be extended for a period equivalent to the period of lockdown, or should the commercial risk of any such deferral of the rent commencement date be shared between the landlord and tenant?

• Should the lease be terminable in the event that the lockdown extends beyond a certain date?

• Should restrictions be placed on occupation density in common parts to cater for social isolation?

• Can the landlord close the property or building in the event of a requirement for a deep clean at any given time?

• What will happen in the event of a future lockdown resulting from a second, and subsequent waves of infection within the UK?

Care should also be given to the drafting of the conditions for the ending of the concession, taking into account the government’s recent announcement that lockdown will be lifted in stages, with different business sectors recommencing business at different times.