To begin with some words that you won't have read before: in some ways legally these are not unprecedented times.
Over the last century courts have considered the issue of whether a lease can be brought to an end by an external event over which neither Landlord nor Tenant have control.
In 1919 the American congress passed the Volstead Act which brought Prohibition into effect in the whole of the USA. Breweries were tenants of thousands of bars and saloons which were now worthless illegal businesses. The Breweries were allowed to treat their leases as frustrated as the purpose agreed between the landlord and the tenant for which the lease was granted was now impossible to fulfil.
Here, when the issue has come before the courts the judges have looked at more factors than just the immediate disruption to a business that an external event might cause.
Here are some factors to consider about your lease when looking at the viability of your business post-covid:
Your type of business
Will you be allowed to reopen shortly, or if you run a hospitality or entertainment business is there no end in sight to your closure?
Are you tied in to a purchasing agreement with a brewery, pub company, or oil company?
Your premises
Can they be used for any other purpose or does your lease narrowly restrict their use?
Structure
Can your premises be easily adapted to comply with social distancing guidelines, and will you need your landlord's permission to make those adaptations?
The length of your lease
If you have a short lease and your business is going to be closed for a long period of time you may have good grounds to argue that you should be released from the obligations in your lease.
If your lease still has several years left to run even a closure of a year or possibly more may not frustrate the purpose for which your lease was granted, and you will remain bound by it.
Break clause
Do you have the right to terminate your lease by giving notice to your landlord?
Rent Deposit
Does your landlord hold a deposit from you as security for payment of the rent and service charges?
The answers to these questions will help you decide whether to argue with your landlord that your lease has been frustrated by the Covid crisis.
If your lease has been frustrated you may even be entitled to recover rent that you have paid and a rent deposit that your landlord may be holding.
In 1943 in the middle of world war two parliament passed the Law Reform (Frustrated Contracts) Act. This entitled a party to a contract get money back that they had paid before an external event had frustrated the performance of the contract, subject to the right of the other party to be reimbursed for legitimate expenses that they had incurred.
At the moment, landlords are prevented from forfeiting leases until 30th June by emergency legislation, so the coming month is the time to take a hard look at your business lease in the cold light of the 'new normal'.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
