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You are here: Home / Uncategorized / Rent “holidays” in the context of COVID-19

Rent “holidays” in the context of COVID-19

24/03/2020 By wealden

Due to additional pressures on businesses caused by the coronavirus/COVID-19 outbreak, business tenants are asking their landlords for rent “holidays” to help them get through.

Though the government has announced support for businesses, there is no specific government help for businesses to pay rent – rather, access to an as-yet unspecified scheme whereby business can borrow to pay their way:

  • Any business that needs access to cash to pay their rent, salaries, suppliers, or to purchase stock, will be able to access a government-backed loan on “attractive terms” (which have not yet been specified).
    • That support will be delivered to small and medium businesses via the new Business Interruption Loan Scheme (announced at the Budget), which will now provide loans of up to £5 million, with no interest due for the first six months.
    • The scheme will be up and running by the start of next week.

I suspect that the scheme will involve business owners applying to their banks for loans which, if as-yet unspecified criteria are met, will be guaranteed by the government, increasing the likelihood of the relevant bank agreeing to the loan.

Landlords should therefore bill for rent as normal: the tenant will need the bill to prove the need to pay rent and therefore the need to receive the loan.

In addition, businesses with premises with a rateable value no more than £12,000 (and therefore eligible for small business rate relief, assuming they have only one set of premises) are eligible for a grant of £10,000, while those with premises with rateable values between £12,000 and £51,000 are eligible for a grant of £25,000. The criteria for these grants have not yet been published.

If tenants ask for a rent “holiday”, landlords should point out the availability of the support from the government and encourage the tenant to use that, rather than expecting the landlord to suffer a loss of or delay in income; the landlord can offer reassurance that, as long as an application for a support loan is progressing, the landlord will not press for payment.

If, despite this, the tenant presses for a payment “holiday” and the landlord decides to agree, make it clear exactly what is being agreed –

  • The waiver of rent for a specific period or
  • The deferral of rent in respect of a specific period for a specific time and how the deferred payment will be made good at the end of that time (eg: by instalments of £x per month in addition to the on-going rent)

Justin Nelson: 18 March 2020

Nelsons Legal Limited – justin@nelsonslegal.co.uk – 01580 767117

Filed Under: Blog, Uncategorized

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