Leasing and covid-19: faq's

The BRM team has compiled a list of frequently asked questions that may apply to your situation as a commercial tenant in the current pandemic.

Should you pay rent?
What does the moratorium mean?

DO I PAY RENT FOR APRIL, OR MAY?

If you can and not impacted, then yes - act in good faith, but for most companies, not yet. In light of the freeze coming, we would recommend not paying next month’s rent. If you have an auto-payment setup, put that on hold. You probably need cash reserves for more urgent matters.

DO I NEED TO SPEAK TO MY LANDLORD? 

Yes, don’t leave your landlord in the dark regarding your approach. We are all in this together. 

HOW IS THE GOVERNMENT ASSISTING?

The Commonwealth Government announced on 29 March, that landlords will not be able to evict tenants who are unable to pay their rent due to financial stress caused by COVID-19 for the next six months. Further information will be provided soon through our blog.

WHEN MY LEASE COMES UP FOR RENEWAL, SHOULD I EXERCISE MY OPTION FOR ANOTHER TERM, OR HOLD OFF?

The current landscape is changing rapidly. While having certainty about your future accommodation is important, we would suggest delaying the decision for as long as possible to allow new legislation and market conditions to catch up.

WHAT IF MY LANDLORD DOESN'T WANT TO ASSIST AND IS NOT OFFERING RENTAL RELIEF?

Currently there is no formal legislation, just a directive from Scott Morrison to sit down and be reasonable. All parties need to be considerate of the various position and stresses.

I CURRENTLY HAVE A HEADS OF AGREEMENT IN PROGRESS, SHOULD I PROCEED?

A Heads of Agreement is a common part of the process of negotiating a retail/commercial lease transaction. On some occasions the HOA is binding, and further legal advice should be sought.

If you have not signed a HOA, we would suggest holding off due to rapidly changing market conditions and legislation. 

If you have signed the HOA and paid a deposit to secure the space, each landlord will respond differently in this scenario. In our experience and given the current situation, good quality landlords will be understanding of your circumstances - a refund will generally be provided for the deposit paid and the HOA is annulled, allowing the landlord to return to market and make the space available for lease (the landlord may seek compensation for legal fees which could be deducted from the initial deposit).

I'VE CLOSED MY BUSINESS DUE TO THE RESTRICTIONS ON NON-ESSENTIAL BUSINESS. I SIMPLY CANNOT AFFORD MY RENT BEYOND NEXT MONTH. SHOULD I FORFEIT MY LEASE?

You should seek legal advice. Most leases are likely to remain ‘on foot’. 

The government has been very clear in the last few days announcing that small to medium size businesses may need to hibernate for a period of time, but should not re-emerge saddled with debt.

Talk with your landlord, explain your immediate/short term challenges and to work through this together. Look to preserve the relationship and lease agreement, even if this means a short-term discount or deferment of rental payment. 

Your accountant may be best positioned to provide further advice as they will understand your current situation and can assist helping you access the appropriate stimulus and relief packages. You can also refer to our tips for starting a conversation with your landlord here.

I AM RETHINKING MY SPACE. IF MY LEASE IS EXPIRING SHORTLY, IS NOW A GOOD TIME TO CONSIDER REDUCING MY OVERALL SPACE AND OVERHEADS?

Each business is unique. Given the current climate we find ourselves in, business owners in the short term are preserving cash reserves to ensure long term viability. Whilst there may be an initial need to reduce one of the largest costs of your business, there are many other considerations including spatial efficiency, staff and client access and travel times, remote working options, whether you need main road exposure, as well as your current make-good obligations in your lease.
The list is long, and the impacts may be significant. 

WHERE CAN I GET MORE HELP?

Speak with one of our experts about your obligations under your retail or commercial lease, and for advice on negotiations. Contact Us to learn more.