Whether you’re the landlord or the tenant, having a positive relationship with the other party is always important. In fact, great relationships often reflect many benefits for both parties – from better financial security to simply less sleepless nights.
However, relationships have been tested to their limits recently for obvious reasons. The COVID-19 pandemic and its associated financial implications have meant many tenants have struggled to keep up with their payment obligations, which has directly impacted landlords. It’s a problematic situation on both sides and one that needs careful thought in order to maintain relationships.
Therefore, in this blog post, we will delve into what you need to know when it comes to your lease – whether you’re a tenant or a landlord. We aim to help you navigate challenges and reduce relationship strain.
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Why is the landlord-tenant relationship important?
First things first, let’s go back to basics – and understand why a positive tenant-landlord relationship is vital.
Essentially, it boils down to security for both the tenant and the landlord. During these difficult times, we have to remember we are all human – and emotions are frayed on both sides of the relationship. This can lead to heightened frustration, snap decisions and irreversible damage to your relationship. And when a relationship is damaged, this could accumulate in:
- Late or mispaid rent
- Unfulfilled maintenance obligations
- Disrepair to a property
- General communication breakdown
- And much more…
Long-term occupancy and better cash flows
However, by preserving the relationship, the landlord is more likely to work with tenants to help with cash flow in the short term and achieve a longer-term benefit in the medium to long term.
Over the past nine months, we have seen a range of both landlord and tenant-made proposals that look to reduce or defer payments made in the short term to aid a tenant’s cash flow. In return, there is the offer to extend the current lease term for a landlord, which will assist in the landlord’s overall security.
Additionally, we have seen wide-ranging rent deferment periods where either reduced rent or no rent is collected for specific periods but that a payment plan is put in place to pay back the deferred rent. This recompenses the landlord over a longer period and helps the tenant’s cash flow when they really need it.
Few landlords wish to be faced with a vacant building and especially so in times of market uncertainty. Therefore, on the whole, landlords are often willing to work with tenants when they need it. A productive relationship between landlord and tenant is good because communication is open and payment history of rents and costs are strong.
3 essential steps to maintain your relationship
There are practical steps that both the tenant and the landlord can take to maintain the relationship during these difficult times. Mostly, they boil down to clear communication. Let’s take a closer look…
1. Understand your obligations as a tenant
The Coronavirus Act 2020 has assisted businesses in the short term and provided greater security to those businesses which have cash flow problems – but it is essential to recognise that the rental liability does not go away.
As the tenant, you will need to pay your rent where an alternative negotiated arrangement has not been reached. The principle terms of your rent and occupational costs are held within your lease and even when payment of rent is an issue in the short term your liabilities for this, together with repair, service charge and insurance (where relevant), are still held by you – as the tenant.
Discussion with your landlord or his agent may lighten the burden in other ways, other than rent. In some cases, landlords will agree to pay for repair or improvements, service charge or insurance which may aid with cash flow and help with the occupation of the property and the property itself.
It is key to remember that the landlord is in business too, and proving your commitment to the lease will increase confidence on both sides and give the best possible chance of reaching a compromised agreement to assist.
2. However, never assume
Undeniably, there is a lot of ‘noise’ around the pandemic and the various measures in place to protect businesses. Therefore, our advice is never to assume that all parties are working to the same knowledge and in agreement.
Despite comprehensive guidance and a ‘code of practice’ being issued, there are still likely to be grey areas that you’ll need to iron out before taking action, or taking no action, as the case may be.
For any relationship – personal or business – communication is key, and that very much stands up here. However, bear our next point in mind.
3. Always speak to your agent
Yes, communication is key – but misunderstandings during communication can lead to more damage. So, although we encourage open conversations, we strongly encourage you to speak to us first.
Advice for tenants
For instance, if you come to us to explain you are going through a time of financial difficulty or planning ahead to sustain the business, we’ll explore all options thoroughly before approaching your landlord. This would include asking:
- What actions have you taken to date to improve your financial situation? Have you fully explored:
- Rates rebate options
- The furlough scheme
- Local authority support
- Bounce bank loans
- Other support depending on industry/ sector etc.
From this, we could discover you have alternative options to explore before non-payment of rent. Often, the tenant or landlord may not have thought of these alternative options or have practical advice around this subject – so, that’s what we are here for.
Even in situations where all options have been exhausted, we can act as a mediator between the landlord and tenant. Think of us as a broker of dialogue. From suggesting payment plans to checking for any dispute resolution provisions, we help maintain transparency between two parties – even if things do become strained.
Do you have a lease renewal or rent review coming up? Discover how we can help negotiate a great deal for you, as a tenant.
Advice for landlords
Specifically, on the landlord side, we can also advise you on our experience of market activity in specific sectors (retail/offices/warehouse & industrial or land) and how to remain flexible to achieve the best outcome. This could include considering regearing of leases to enhance security and value, short-term lets and potential temporary deferral or reduction in rents where the tenant has demonstrated their position.
Or, simply, we could suggest ways to reduce your expenditure – which in turn helps you be more flexible to your tenants’ needs while their business is closed or operating at reduced capacity.
After all, whoever we represent, the outcome often has long-term benefits for both parties – especially so in these circumstances.
Get help navigating commercial leases during the COVID-19 pandemic
At Mounsey Chartered Surveyors, we act as commercial agents for both landlords and tenants – and have thorough understanding and experience on both sides. This means we can represent our clients’ best interests, with excellent knowledge of how a lease works holistically – even during these challenging circumstances.
Our final message is, don’t struggle on your own. Speak to us, and we’ll help you maintain a great relationship with your tenant or landlord that improves the chances of a tenant’s business returning to prosper and a landlord receiving their owed and deserved income.
More advice for commercial property landlords
As a commercial landlord, you may be wondering what the bigger picture is? What are your next steps? What can you do during and after the pandemic?
Speak to us to see how we can help you navigate the commercial property world during and after the pandemic – and discover some great and likely-profitable options for you to explore.