Question :
How have businesses dealt with commercial landlords who refuse to reduce rental payments, even though sales have decreased dramatically because of covid

Question submitted 05/05/20 @ 08:42pm
Industry: Legal
  • I am interested in this also.

    Morena – check out the advice in the Retail and Legal forums on this site as there are some great Korero around this topic. Short answer, look at your lease terms, does that include a clause around rent abatement in the case of emergency? Next talk to them, if they want move, then think about what other options – the most extreme is you make an assessment of what you think is reasonable to pay, and just do that. Paying nothing is a risky strategy. Then reach out and explain why.

    Hi Business owners
    Most landlords have at least agreed to a reduction during the lockdown period (usually 50%) or deferral in payments. The question is what is reasonable rent now at Level 3.
    If you have tried to negotiate and are not getting a result it is likely time to engage a lawyer to provide you with advice, negotiate and represent you at a mediation.
    The ADLS Property Committee are setting up a mediation service on a fixed fee basis but you need a lawyer to represent you at the mediation and to enter into any agreement.
    I also provide a 30 minute free initial no obligation consultation on rent and lease issues if you wish to discuss your individual circumstances.

    Morena. Andy is correct in that the key question is whether you have a right to a rent/outgoings abatement in your lease. If you do not have this clause, then you are relying on the goodwill, effectively, of your landlord.
    In terms of the tactic of not paying rent, at a very high level, if you do not have a right to an abatement, and elect not to pay the rent and outgoings (whether you pay a percentage or nothing), this will put you in breach of the terms of your lease. The landlord will be entitled to serve you with a Property Law Act notice of breach, and if you do not pay the rent in full, the landlord will be entitled to cancel the lease. In response to the pandemic, the Government has extended the period within which you, as a tenant, have to pay the rent to 30 working days. So, if you do not pay the rent, and the landlord issues a Property Law Act notice, you have 30 WD to remedy the breach and avoid cancellation. There are other things you should consider though if taking this approach, including the damage that it will likely do to your relationship with the landlord. This is a risk that we have seen some tenants decide they are prepared to take either to prompt engagement from the landlord or on the chance that the landlord might seek not to take action. We would strongly recommend trying to talk to the landlord before taking such a step.
    Please let me know if you are not sure whether you have the abatement right under your lease – I would be happy to help.
    Thank you, Amanda

    Hi Amanda
    We are in a very similar position with a reluctant landlord, no out clause and 100% loss of income for the foreseeable future.
    We are planning to have further discussions with the landlord but assuming we don’t come to an agreement how risky is not paying or partially paying of the rent? Is the worst case scenario being evicted (we can work with that) or are there other legal options to the landlord which ultimately would be worse? Thanks

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