I have a commercial lease and run a fast-food outlet shop in Dublin city. We also do takeaway and have seating inside. Am I entitled to a rent holiday from my landlord due to the effects of Covid-19?
This is a pertinent question and one which many tenants (and indeed landlords) have raised since Covid-19 started impacting business here. Unfortunately, there is no simple answer. The first thing any tenant needs to do is to check their lease. Some leases include a clause called force majeure (described by the legal term act of God). This would include certain unforeseeable events such as riots, wars, earthquakes etc. However, if you have this clause you would need legal advice in relation to its wording as they can vary and the chances are it’s unlikely to cover the current scenario.
In the vast majority of cases you will not be entitled to a rent holiday. In general, what we recommend is an open dialogue with your landlord. You should communicate both verbally and in writing your current position and ask for their forbearance during this difficult trading period. In my experience, most landlords are open to discussing some form of arrangement with their tenants, but this is very much on a case-by-case basis. The reality is some sectors have been hit harder than others. Each tenant/occupier needs to put their individual case to their landlord and suggest a solution. Most requests are based on a rent-free period, rent reduction, deferred payments etc.
Again, tenants need to also be conscious that landlords will almost certainly have financial obligations also in terms of mortgage repayments and other creditors, so I don’t recommend a tenant stops paying without communicating to the landlord. If nothing else, you are in breach of your lease agreement.
Whether your landlord has agreed to your request or not, if you are taking a unilateral decision on rent you need to inform them. Otherwise a landlord can be left very exposed. It’s likely to add strain to the relationship at a time when we all need to be working together. Don’t forget they are dealing with this crisis too.
I would also advise that if the tenant/landlord relationship was strained prior to this, that both parties attempt to put that to one side and focus on the current problem. We are dealing with an unprecedented situation that is not the fault of either party.
Any arrangements made should, as much as possible, be left open. We still do not know how long this pandemic will last and both parties need to remain open to shortening or lengthening any agreement. Tenants should also be aware that once this crisis has abated they may be asked to demonstrate how the crisis did in fact impact their business. This is why it is so important to keep accurate financial records throughout this crisis.
Declan Bagnall is a chartered commercial agency surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie
