Covid-19 has resulted in many aspects of Landlord and Tenant Law being subject to analysis and interpretation over the last few days. Much commentary has focussed on how to end a lease or avoid paying rent, however, it is pleasing to note that many landlords & tenants are clearly working collaboratively to find a solution that is fair to both parties. Indeed, over the weekend it emerged that a number of landlords, for example Network Rail, have agreed not to invoice this quarter’s rent at all.
That said, many landlords will not be in a position to simply not claim the rent, having their own liabilities to cover, and rent payments may be their main source of income. One potential solution might be an agreed rent free period, agreed in return for an extension to the term of the lease that is equal to the rent free period granted by the landlord.
This should be documented by:
- a deed of variation to the existing lease, which grants the rent free period and also ties the existing lease to the reversionary lease referred to below; and
- a new reversionary lease which starts at the end of the existing lease and runs for a term equal to the rent free period granted.
Whilst this reversionary lease may attract an SDLT liability (depending on the level of rent and the term) it will in many cases not be “linked” with the original lease and the SDLT liability (if any) can be calculated separately.
In many cases, no additional SDLT will be payable at all, but to avoid any penalties an SDLT return should be submitted where applicable, even if no SDLT is due to be paid.
Both the deed of variation and the reversionary lease will, where necessary need to be registered at the Land Registry.
One other alternative, where a break remains unexercised, is an extension of the rent free tied to a push back of the tenant break. This would not trigger an SDLT liability as there would be no extension of the lease term and indeed no other land transaction for SDLT purposes.
The above is a quick ‘something to consider’, but if you wish to discuss anything related to the rent due at properties that may not be accessible now or in the near future due to restrictions, we are here to talk and think of a solution that suits you.