IT is usual for businesses to lease premises rather than buy them.
In these hard pressed times, both landlords and tenants will end up scurrying to their top drawers to pull out and “dust off” their lease documents to check their legal rights and obligations.
However, seeking to enforce strict legal rights may not help either party where the tenant is short of money and the landlord does not want an empty property.
In such circumstances the parties need to work together to keep the business afloat.
So what can be done? The parties need to be creative. They will need to consider whether any changes to the lease can tide the tenant over during a period of difficult trading.
Firstly, the parties can look at the intervals at which the tenant pays rent.
Commercial leases usually require the tenant to pay rent in advance on a quarterly basis. This can be quite demanding on cash flow.
On that basis, the parties need to ask whether it would be helpful if the rent payment clause was varied so that rent is paid on a monthly basis.
Furthermore, the tenant could request a “rent holiday”. This can be a useful short term measure in that the rent is merely suspended for a period of time and then paid back later.
Most commercial leases include provisions for a rent review at certain specified intervals. A point of negotiation for the tenant could be either suspending the review or initiating the review and introducing the revised rent in stages.
Leases usually do not allow the tenant to share occupation with another party.
If the tenant has surplus space, perhaps someone could be found to share occupation of the property and contribute to the costs of rent, overheads, etc.
Landlords should take seriously any request by a tenant to either sub-let or share occupation of part of the property.
However, landlords will need to be very careful that, in these circumstances, their interests are properly protected.
In all cases, what both parties need to realise is that even though a lease is a contract the terms are not “set in stone”.
They can be changed with mutual agreement. A word of caution. Any changes to a lease must be properly documented to avoid unwanted consequences.
Legal advice and possibly advice from a surveyor should be sought before any changes are implemented. Some changes to a lease can result in a deemed surrender of the existing lease and the creation of a new one. This could have disastrous consequences!