In most cases, the answer will be no. Most leases and tenancies only provide for rent to be suspended if the property is destroyed or suffers physical damage which renders it unusable by the tenant; and where that damage is caused by an “insured risk”. That would not usually cover a Covid-19 situation. Well drafted leases usually provide that the tenant cannot otherwise withhold or delay rent payments.
There may be cases where leases allow for the suspension of rent where an uninsured risk occurs, but this is unusual. In any event, the ‘uninsured risk’ provisions of the lease would need to be carefully checked to ensure they would clearly cover a Covid-19 type situation before the tenant could safely seek to suspend payment without risking a breach of the lease and incurring the penalties associated with that, such as default interest.
If the landlord has insured against loss of rent, it is likely that will be linked to the physical damage situations referred to above but cover should be checked in any event with brokers and insurers – given that Covid-19 has been designated a ‘notifiable disease’.
Tenants should also check what cover they have for business interruption under their general business insurance – again with their brokers and insurers. The fact that Covid-19 is a notifiable disease may be relevant, as may situations where tenants have been required to shut down their business in order to comply with Government requirements or guidance.
As mentioned above, where cover is available, this may help to mitigate or avoid arrangements the landlord and tenant might otherwise need to put in place to allow for the exceptional circumstances.
If we can assist with any questions you may have, please contact the TSP Commercial Property team on 01206 574431 or by e-mail at info@tsplegal.com.
This note is for general information and guidance and is not legal advice.
