ImagesMagUK-July-2020

BUSINESS DEVELOPMENT www.images-magazine.com 22 images JULY 2020 ■ Business secretary Alok Sharma is creating five new business-focused groups “to unleash Britain’s growth potential and create jobs” in order to aid an economic bounceback from the pandemic. The five themes the groups will focus on are the future of industry; green recovery; backing new businesses; increasing opportunity; and the UK open for business. www.gov.uk ■ Research by Aston University suggests UK firms are diverting more than £10 billion in exports away from the EU “as concern mounts over a possible collapse in Brexit trade talks”. The analysis of 26,000 firms found that the smallest ‘micro exporters’ had switched as much as 46% of their new export growth by value from EU to non-EU markets since the 2016 referendum, while for small firms this figure was 19%. www.aston.ac.uk I can’t afford my next rent payment. What are my options? C ovid-19 has hit businesses hard, leaving many business owners struggling to afford their commercial rent. While it is important to check your lease to establish your individual position, here are some of the main things to be aware of if you cannot pay the rent. Terminating a lease or tenancy Tenants cannot terminate their lease if they choose to close their business or can no longer afford to pay their rent, unless their lease includes a break clause. Break clauses are not uncommon these days, so check. Commercial tenants may assume they can miss payments on their rent without penalty because Covid-19 isn’t something they could have foreseen or prevented, but that is not usually the case. For this to be at best potentially valid, tenancy agreements must include a ‘force majeure’ clause. Although commercial leases do not usually contain this clause, tenants should check just in case. In most instances, the tenant of the commercial property will need to pay their rent as normal. However, it is important to note that the Coronavirus Act 2020 prevents any landlord from evicting a commercial tenant due to a missed rent until 30 September 2020. Withdrawal of an exchanged agreement for lease (AFL) An exchanged AFL is a contract that has already been agreed between two parties to grant/take a lease at a future date. A tenant’s right to withdraw from an AFL depends on the terms of the agreement, but usually such agreements do not allow withdrawal. If an agreement contains conditions that cannot be fulfilled because of Covid-19 then that could bring about a right to terminate – for example, a condition requiring a landlord to undertake work within a certain timeframe before the lease is completed and which can no longer be achieved due to the disruption caused by Covid-19. Where agreements contain such provisions, landlords and tenants are advised to discuss whether to extend any timescales, given that Covid-19 was such an unforeseen circumstance. Withholding rent Commercial leases usually contain a clause stating tenants cannot withhold rent payments. Therefore, a tenant is not entitled to withhold their payments or pay a reduced rate as a result of loss of business or cashflow issues. This also applies if a tenant decides to cease trading, whether that is temporarily or permanently. The government is encouraging landlords to show understanding during these testing times and to discuss voluntary options with tenants. Tenants and landlords may want to consider new arrangements, such as rent holidays or concessions. It is important that any terms agreed are properly and legally documented so there is no ambiguity. Keep-open covenant Some retail leases contain a keep-open covenant, which requires tenants to actively trade for the duration of their lease. However, if the business chooses to close, the landlord can’t always force them to open under a keep- open covenant as the courts rarely enforce these agreements. ‘Following government guidelines’ is often an exception of keep-open clauses, however it will largely depend on the drafting of the clause and tenants should always check before making any decisions. Seek expert advice Retail tenants must take time to familiarise themselves with their leases, including all the key terms included, as well as check insurance policies to see if they are covered for events like a pandemic. If they cannot pay their rent and need advice, they should speak to an experienced legal professional who will be able to guide them further, as well as review any agreements made with their landlord in order to reach the best possible outcome. Expert advice on the business of running a garment decoration company Q&A David Kemp is a partner in the real estate and development team at Blaser Mills Law, a full-service leading law firm that offers a comprehensive range of legal services to businesses and private individuals. It acts for blue-chip companies as well as SMEs, entrepreneurs and not-for-profit organisations. www.blasermills.co.uk