tenants in financial difficulty
In difficult economic conditions, tenants can only too easily run into financial difficulties and not afford to keep up rent payments under commercial leases. If the rent is not paid on time, most landlords, being commercial operators, will not be slow to take legal action, including irritancy, against the problem tenants.
What, then, should businesses do if they find themselves in such problems?
Businesses should identify the scale of their problems. Are they in financial difficulties because of one-off, exceptional difficulties or are things more serious than that?
If the former, then it makes sense to be up front with the landlords and explain the details of the problem to them. Most landlords would probably accept the explanation (provided there have not been past problems) and may agree to a temporary delay of some rent and/or allow the business to pay the rent at monthly rather than quarterly intervals, in order to assist the business’ cash-flow position.
If things are more serious, then the business should work out if it has a viable future (for example, will it be profitable after removal of loss-making parts of the business) and whether there is a realistic restructuring plan (usually, this will be dependent on bank and/or private capital financing). If the restructuring plan involves the leased premises in question, the business should prioritise payment of rent to the landlord in question, so that the landlord will be more willing to assist with the restructuring exercise. For example, where the business owners decide that an administrator needs to be appointed as a precursor to a financial rescue package, landlords may be willing to go along with the rescue plan, provided they are not financially out of pocket.
Given the complexities of tenant financial difficulties, it makes sense to speak to qualified solicitors.