20 Feb 23 by Mary Sloman
Pandemic Clauses in Leases
Given the unprecedented situation we were faced with back in 2020, many tenants are now mindful that their conventional commercial leases do not provide a safety net should the Government require tenants to stop trading. Specific pandemic clauses in leases may include the suspension of rent or a reduction in rental payments. They may also include the suspension of other covenants within the lease including the repairing obligations or the payment of service charges.
Such pandemic clauses in leases are particularly prevalent in the retail sector, highlighted by the 2021 case of Poundland Limited v Toplain Limited where the tenant (Poundland) wanted a pandemic clause incorporated in the lease renewal. This pandemic clause would have resulted in the tenant paying just 50% of the rent and the service charge if a ‘lockdown’ was to occur, not to mention, they remained open during Covid as they sold food. Predictably, this was disputed by the landlord. The court came down in favour of the Landlord and stated that it would disproportionately affect the landlord and that the tenant may be able to obtain government relief or funding.
Needless to say, whether the parties agree to include a pandemic clause will largely depend on the unique circumstances of the transaction, for example, the length of the term and the type of premises, and ultimately the bargaining strength of the parties.
Recently we dealt with a lease renewal of a retail premises in Plymouth whereby the tenant requested a pandemic clause to be included. The Landlord agreed to this on the basis that the tenant would bear the legal costs of a solicitor including the clause in the new lease. We have also seen break clauses included in pandemic clauses where the notice period is significantly reduced, some to a matter of weeks!
Vickery Holman are property consultants with an expert lease advisory team. Please get in touch to find out more about lease renewals and rent reviews.