Catherine Gannon, founder of Gannons Solicitors, advises operators facing crisis due to a loss of revenue and footfall on what they need to do when entering discussions with landlords.
Silence is not an option
Easier said than done, but, above all, don’t panic. The worst thing operators can do during this crisis is stick their heads in the sand. You must help yourself. This is the time to do as much as feasibly possible to keep your business afloat to ride the crisis. Silence is simply not an option.
Making the call to your landlord
Firstly, operators need to make the call to their landlords and then speak with employees. From my experience, landlords are more likely to be open to a conversation on deferring an operator’s rent for an agreed period of time if an operator is open and honest from the outset about the situation. The key here is to have that conversation sooner rather than later, and before falling into arrears or defaulting. Additionally, it may sound obvious, but ask nicely.
It is important to note that most agreement clauses don’t have a force majeure in place, which would prevent a business from fulfilling a contract in unforeseeable circumstances, such as the coronavirus. However, that’s not the case with leases. So, the only option open to operators is to enter into negotiations with their landlord.
If landlords do not follow new government rules seek advice
The new direction from the government buys tenants time to work out what to do next. To prevent evictions down the line, it is important to continue discussions with landlords about possible scenarios at the end of the moratorium, whether it’s extended beyond the three-month period or not.
If landlords don't appear to be following the new direction from the government, then they are likely to be breaking the law and so tenants should seek legal advice.
Reviewing the crisis through the eyes of a landlord
Landlords know this is a genuine worldwide crisis. Most importantly, they don’t want an operator to default on rent payments. Remember, the majority of landlords would prefer agreed rent arrears than defaults. Why? Because, if they force rent payments during this crisis, the likelihood is that operator will go out of business, leaving them with rent arrears they can’t recover. Shrewd landlords are therefore looking to mitigate their risk of losing everything.