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Should landlords assist struggling tenants?

03 Jun 2011

A number of our landlord clients have experienced an increase in requests from their tenants asking them to temporarily relax or reduce the quarterly rent payments due under their lease.

Whilst the initial reaction may be to resist any such request, this may be short-sighted. The result of, for example, a refusal to accept monthly rent payments may be that the tenant becomes insolvent, and any re-letting is now likely to take longer than has been the case in the past.

A temporary relaxation of the quarterly rent payments or a short-term reduction in the amount of the rent paid may therefore be commercially sensible in the current economic climate.
Before any agreement in principle is reached, it is reasonable for a landlord to ask for detailed financial information from the tenant, such as management accounts, audited accounts and profit projections.

If any rent concession is ultimately agreed to, it is essential that this is formally documented by way of a side letter. This should:

  1. specify the reason for the rent abatement;
  2. be personal to the tenant, ceasing on any assignment or subletting;
  3. be for a specific period; and
  4. be confidential to the tenant.

Obtaining the consent of any guarantor and/or any lender should also be considered, and it may be possible to agree an outstanding rent review or other outstanding tenant negotiation in exchange for agreeing to the temporary rent concession.

Please contact Richard Freeman-Wallace on 0191 232 8345 or email Richard Freeman-Wallace@hay-kilner.co.uk for further assistance or advice in drafting rent concession letters.

Please note:
This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.