Need extra time on your retail lease? This may help you.
The upheavals caused by the coronavirus pandemic have been felt in many areas, and one of those has been commercial and retail leases.
We have observed that tenants are not just being put under financial distress to pay the rent because of the government restrictions imposed. Many have also been put under pressure finding new premises to move to, because of the difficulty of conducting in-person inspections of new premises, and the difficulty of arranging removal of equipment, in periods leading up to the expiry of their lease.
The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 do not offer specific relief in this regard (they require a limited extension of the lease only in the case where the landlord has offered a deferral of rent), but one pre-existing aspect of the Retail Leases Act 2003 may come into play here (for leases classified as “retail leases” under the Act), even though the emergency regulations do not offer any assistance.
Section 64 of the Retail Leases Act requires landlords to give at least 6 months’ notice, but no more than 12 months’ notice, of the landlord’s intentions in relation to a lease which is to expire without any further options. The landlord must (within that period) either notify the tenant that it will not offer a renewal of the lease, or offer the tenant a renewal on particular specified terms (which must include a specification of the rent being offered). The consequence of a landlord’s failure to comply with this requirement is a lopsided situation whereby the lease is extended indefinitely until at least 6 months from the date when the landlord does in fact give such a notice, but the tenant is able to terminate at any time after the term of the lease ends.
We have observed that, in many cases, landlords have neglected to give such notice to tenants, and tenants have therefore been in a position where they are at liberty to remain in the premises for an extended period of time, but are also in a position to terminate the lease at any time.
If you are a tenant facing an impending end of your term, section 64 may be a lifeline for you to take the time you need to move premises. On the other hand, if you are a landlord, you should check that you have complied with this section to ensure you are able to secure the vacation of the premises by the tenant at the end of the term.
If you are unsure about any aspect of a retail lease, please contact a member of our Team.
