No rent from hairdresser tenant since March. Is the lease broken?
Try and engage with tenant to reach agreement on the past and future rent
Hairdressers had to close during the pandemic but were able to reopen from June 29th. All the indications were that they would be busy.
When can I expect to receive rent from a tenant renting my commercial property? I have received no rent since the end of March and they opened back up at the end of June. It’s a large hairdressing salon on a busy main street in the southeast of the country. I would very much like to know if the lease is broken?
Declan Bagnall replies: This is a sensitive issue. On the face of it you were always entitled to receive your rent. That is, unless there is a specific clause within the contract that allows the tenant rent relief, such as a force majeure which deals with a pandemic. However, the reality is that we are, and have been, in unprecedented times and most landlords have assisted their tenants through this difficult period.
What surprises me about your query is that you don’t appear to have had any engagement from your tenant and are therefore very much in the dark as to when you will receive rent. Both the Society of Chartered Surveyors Ireland and individual surveyors like myself have been advocating an open dialogue between landlords and tenants since the start of this pandemic.
My advice in your position is to proactively engage with your tenant and endeavour to come to an arrangement with them.
The type of agreements being reached between parties can vary greatly and it often depends on the type of business the tenant is involved in as well as the circumstances of the landlord. Some businesses, such as retail and particularly the hospitality sector, have been hit very hard; other areas such as online retailing and supermarkets less so.
Landlords may also have obligations such as bank payments to make. In times of crisis we need to be sensitive to everyone’s circumstances.
Agreements may take a number of forms. Rent freezes, rent abatements, deferred payments. If the lease is close to expiring, the landlord and tenant can agree to extend or restructure it. You indicated that your tenant is a hairdressing salon. Certainly they had to close during the pandemic and although they were able to reopen from June 29th, all the indications were that hairdressers would be busy.
That said, there were undoubtedly additional costs and, due to social distancing, they may not have been able to see the same number of clients at one time as they did previously. You are entitled to ask for proof, such as trading accounts, to substantiate any requests for relief.
Non-payment of rent, generally speaking, would break the terms of the lease but the specifics of this vary in each contract. There is little point in trying to forfeit a lease if it’s going to take a considerable amount of time to re-let the premises. There can also be significant costs associated with securing the forfeiture, particularly if the tenant fights it.
Nevertheless, you must protect your position and therefore my underlying advice would be to try and engage with the tenant endeavouring to reach agreement on the rent (historic and going forward). If the tenant refuses to either respond or enter discussions, then I think you need to seek the advice of your solicitor as the situation cannot run on indefinitely.
Declan Bagnall is a chartered commercial agency surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie