Impact of Coronovirus on Tenants

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    Impact of Coronovirus on Tenants

    I'm anticipating queries from tenants regarding the impact from the Coronovirus should the government instigate a mandatory closure of all non-essential stores in the coming weeks.

    As a landlord what would be an appropriate/reasonable response and measure?

    Provide a period or rent relief? From a landlord perspective, could this be classed as business interruption under insurance?

    These are small businesses with no payable business rates so they are also eligible for emergency government funding to support their business.

    Would like to get feedback from others on how best to support tenants, you feedback is much appreciated


    #2
    Aren't the government already supposed to be supporting small business if this happens? (In England at least).

    Amongst other things they have already waived their business rates if they are under £51,000, and there is an aditional £3,000 grant.
    https://smallbusiness.co.uk/how-do-i...grant-2549866/

    In the event of a mandatory closure then I would expect further government help, and measures to prevent commercial (and domestic) evictions for rent arrears.

    Giving a rent holiday would just be moving the problem further down the line, to yourself rather than your tenants.

    Comment


      #3
      I have never been involved with Commercial property -- but I cannot see why this would be a problem you have to deal with in any way.

      You could of course deal with it a s business person would -- if you think the period of closure would make them go bust, and that would be to your detriment, you could assist them to stay afloat (in your own interest).

      No amount of government assistance is going to bail everyone out without completely collapsing the government coffers. And what of all the freelance people - what help do they get - private teachers, wedding photographers, small hotel owners. Selectively compensating people is likely to lead to riots.

      Comment


        #4
        Maybe I am too soft but a good tenant operating a small restaurant in a shop on lease from us has approached and said that trade has dropped like a stone, hardly anyone coming in, takings negligible. We have agreed that he can pay on account half of the rent for this month and next month. I didn't say we'd write off the balance. He wrote with warmest and most sincere thanks. My view is that in this unprecedented crisis there are going to be some commercial businesses more acutely hit than others and that there is merit in doing something to help. 50% of something is a lot better than 100% of nothing

        Comment


          #5
          A restaurant is going to be hard hit, and one of the first type of business to be be shut. (Along with pubs - Arrrgh).

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            #6
            I have long reasoned that a well-run small business should have ample reserves to tide it through lean (including non-existent) times. That many do not is often because the owners (directors and proprietors) have taken and still do take too much out of the business so as to fund their own life-styles, life-styles which are often above their station. The same principle applies large/larger companies that have expanded inorganically and are over-dependent upon debt.

            When considering a tenant request for clemency, I would want my landlord-client to know what steps the tenant has taken and is taking to fund for themselves the cost of riding out the downturn (negligible takins). Once the landlord is satisfied with the answer including any suggestions to reduce overheads followed through by the tenant, it becomes a question of whether the landlord can afford to exercise discretion or is content to allow the tenant's business to fail.

            If grilling the tenant isn't done then the landlord isn't going to know whether the request is genuine or the tenant is trying to pull a fast one. I foresee a lot of tenants trying it on.

            With shops, it is important to remember that shopkeepers and retailers are good at selling, successfully selling the idea to the landlord that they (tenant) cannot afford the rent is a good way for landlords to end up subsidising the tenant's life-style.

            In my opinion, landlords of commercial property are not obliged to be inhibited by a desire to be popular. Opportunities arise to capitalise, For example, where a tenant's lease is inside LTA54, agreeing to suspend the rent for a few months provided the tenant agrees for the lease to be taken outside the Act could be a small price to pay.

            Comment


              #7
              Personally I am a pragmatist

              Comment


                #8
                I own a small building which is rented out to a restaurant business, and the rent is my only income. They have run the restaurant really badly, and have been consistently late with rent. I fear that come next month they'll refuse to pay rent at all and use the coronovirus as an excuse. I understand they can access govt grant/help, but aside from that, is there anything the government is offering us commercial landlords anything in this situation? can i apply for a grant/loan etc? thank you.

                Comment


                  #9
                  No I dont think so, but advise your tenant to apply for one of these Government soft loans.

                  Comment


                    #10
                    I have written to my landlord-clients as follows

                    "With the March quarter's rent payment imminent, numerous tenants have contacted me and/or my landlord clients direct requesting rent reduction / rent holidays, rent-free period, and such like.

                    Generally, it is usual for landlords to be seen as the first port of call by tenants wanting rent reductions / rent holidays, etc but whether it is right to expect landlords to be out of pocket particularly at a time like this is a moot point. Landlords have financial commitments too. So far the Government has not indicated that landlords of commercial property are to receive Government support.

                    In 2016, I wrote about affordability on Landlordzone -https://www.landlordzone.co.uk/landl...-the-big-issue.
                    The impact of Coronavirus is uncharted territory but I think the principles that I wrote about are unchanged.

                    Whatever your views on what amounts to subsidising your tenant(s) through this challenging time, whether to be pragmatic depends I would think upon whether the landlord can afford to be.

                    It is also about sorting the wheat from the chaff. I dare say a minority of tenants will try it on - and in many cases succeed; retailers and shopkeepers are adept at selling and that includes selling the idea to landlords that the tenant cannot afford to pay.

                    A landlord owns the property, not the tenant's business (unless the landlord-tenant relationship is not arm's length). Any request for rent reduction, etc is an opportunity to vary the lease if that would achieve an investment or development objective that has otherwise been unlikely.

                    As for straightforward matters where there is no agenda. it is of course entirely up to you for how you want to respond to each and every request for rent reduction, etc. I suggest, however, that rather than accede at the outset, you might in the first instance like to draw to the tenant's attention to the Government's business support package that was announced on Tuesday this week (and at the rate events are unfolding might not be the last).

                    I have prepared the following standard response to requests for rent reductions etc. (For clients I am replying on their behalf if asked but for purpose of this forum you are welcome to use the same wording or rephrased to your style.]

                    ----

                    "Dear (name of tenant)

                    Thank you for your email / letter (insert date).

                    It is a challenging time for everyone but, as I am sure you can appreciate, (insert landlord name) would not want to allow a rent holiday / rent reduction/ rent-free period (wording as appropriate) and be out of pocket when there are Government-assisted ways you can obtain financial support to tide through the coronavirus crisis.

                    The Government has announced a business support package and from the statement the items that your business would appear to qualify for are:

                    To be able to borrow up to £5m via the Coronavirus Business Interruption Loan scheme / British Business Bank with no interest due in the first six months. Any business that needs cash to pay rent, suppliers or staff or to purchase stock will have access to this loan with a view enabling them to continue to trade through the current crisis.

                    All retail, leisure and hospitality companies will be exempt from business rates for a whole year. These businesses with a rateable value of less than £51,000 will be given an additional cash grant of £25,000. Cash grants for the smallest businesses will be increased to £10,000.

                    I would suggest you or your financial adviser contact the British Business Bank - https://www.british-business-bank.co.uk. I do not have any contact details for the business rates exemption but suggest contacting the local Council business rates. More information is available at: https://www.gov.uk/government/public...for-businesses


                    Please let us know how you get on and if it transpires that Government support is unavailable then I can see what else we can come up with.

                    (Not applicable if already paying monthly)
                    In the meantime, I/we would have no objection to your paying the rent monthly and if that would be of interest then you would need to sign a formal agreement so please let me/us know and I/we shall send it to you.""


                    Yours etc"

                    ---

                    Comment


                      #11
                      rentreviewspecialist,

                      I have reverted with something similar as well.

                      With regards to monthly rent, would you have a sample template that could be used to formalise any temporary payment arrangement with tenants?

                      Comment


                        #12
                        Today our commercial T has said come April 1st he may struggle to pay his bill which is 3 months upfront and that could I call HMRC on his behalf to find out what he can get.

                        joker!!! I’m going to say you call them and let me know the outcome. I’ll give you a reduction and then pay the arrears at a later date but one way or another you need to pay. Banks will want there money eventually from me at some point

                        Comment


                          #13
                          Of course the aforementioned is mostly all void as; "The government move to stop landlords from evicting commercial tenants for three months has provided much-needed breathing space for occupiers, many of whom have been instructed to close in the nationwide lockdown as the coronavirus pandemic spreads.

                          Under the moratorium, tenants missing a rent payment because of the Covid-19 crisis will not lose their leases. But the difficulty now lies with landlords and the banks."

                          My question is, how do we get tenants to prove that they are in difficulty due to this pandemic? Or in fact, do they even have to?

                          Comment


                            #14
                            By the way, a special thank you to rentreviewspecialist for all the help and advice that you have given on this site. There is loads of info on the net for domestic landlords - of which I am one also - but little in respect to commercial letting.

                            Comment

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