We have advised a number of landlord clients over the last couple of weeks as to the impact of coronavirus on the management of their buildings and whether they are permitted to close buildings indefinitely.
The below covers the legal issues only and does not take into account HM Government’s advice to stay at home and self-isolate in the event of contracting coronavirus.
Question: Can you prevent your tenants accessing or using the building in the event that one or more of your tenants has coronavirus?
In short, no. The ‘quiet enjoyment’ clause in your lease means you cannot simply lock the building and shut your tenants out. You need to make sure you do not derogate from grant (essentially meaning that you can't give your tenant a right of access to their premises with one hand and then take it away with the other, even in the event of pandemic). In fact, an unlawful closure of the building may be serious enough to justify your tenant treating you as being in fundamental breach and walking away from the lease.
The Lease may also contain provisions relating to access such as allowing tenants access 24/7. Any such access provision should be adhered to.
Also note that your lease will compel your tenant to comply with all statutes, order and bylaws. Whilst your tenant must comply with any government ban on accessing commercial property, this is unlikely to be sufficient for you to prevent your tenant access and the obligation to provide ‘quiet enjoyment’ should be adhered to.
Question: Can you shut down the building on grounds of health and safety, to reduce the risk of spreading coronavirus?
Your lease will likely enable you to make reasonable regulations for the management of the building and require your tenant to comply with any such regulations. Therefore, you may introduce reasonable and proportionate regulations regarding the management of the building (i.e. limiting access to common parts of the building which do not provide access to individual tenants’ premises) to encourage social distancing and stop the spread of any virus.
Leases do not generally contain force majeure provisions (which are more common in commercial contracts and licences) so closure of buildings in the event of ‘an act of god’ is not catered for and therefore simply shutting down your building and locking your tenants out is not advisable.
Question: Must you still provide services to your tenants in the event of one or more of your tenants (or tenant employees) having coronavirus?
Most modern service charge provisions will grant you relief from providing services as a result of circumstances beyond your control. You are however to restore the provision of such services as soon as you are reasonably able to do so.
This question is subjective and ultimately depends on the terms of the Lease. Most leases also contain a list of key services you must provide, such as keeping the building structurally sound, but the provision of the majority of services is likely to be at your reasonable discretion and generally you will only be required to use reasonable endeavours to provide these. Therefore, how often you clean common parts and how much is spent on such cleaning is generally, subject to reasonableness, at your discretion.
Further, if you were to, for example, provide more intensive cleaning services to the common parts in the wake of coronavirus, it is likely that additional costs for such services will be recoverable from tenants via the service charge though, again, this depends ultimately on the terms of the Lease.
We are in uncharted waters here so the best advice to all landlords and tenants is to keep communication lines open, both with each other and with professional advisers.
Most landlord clients we have spoken to are generally amenable to tenant needs at this time. However, prior to agreeing to relax any formal requirements or agree to new or amended lease terms (relating to rent free periods, rent reviews, breaks or expiry, for example) it would be advisable to seek professional advice.
Boyes Turner LLP is very much open for business and the Property Group are all working remotely so are available to provide advice as and when required.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.