Home Knowledge ‘It’s Not Me, It’s You’ Commercial Leases – Remedies for Landlords and Tenants

'It's Not Me, It's You' Commercial Leases – Remedies for Landlords and Tenants

Gráinne Varian and Gerard James of our Litigation team discuss a number of issues we have seen arising on behalf of our clients, both from the Landlord and Tenant perspectives, in recent times

Remedies likely fall under two headings. Either engagement between the parties or legal recourse. With regards to engagement there would be an expectation for a tenant to be full and frank with regard to the impact of the recent COVID-19 measures on its business in the form of full financial disclosure.  In response, a landlord may be willing to agree certain revised terms be it on a temporary or more permanent basis. This willingness on the part of the Landlord can take many guises from the form of a temporary rent reduction or rent deferral. In some instances parties are willing to renegotiate the terms of a the lease. Possible solutions include the surrender of an upcoming break notice in favour of a reduced rent figure or possibly a turnover rent, agreement of a rent free period in exchange for an increased term or an entire surrender and re-grant of the Lease.

Ultimately, there isn’t a one size fits all approach. However, any agreement would need to be properly documented to provide certainty to the parties going forward.

Where the parties cannot reach agreement or there is no engagement between the parties, there are a number of options available to landlords regarding the recovery of rent or otherwise from its tenants.  These include issuing a Letter of Demand seeking payment, the institution of debt recovery proceedings in the Circuit Court or the High Court and, in certain instances, issuing a Notice under Section 570 which is a petition to wind up a company.

Forfeiture is also a remedy available to landlords. However, the recently introduced Emergency Measures in the Public Interest (COVID-19) Act 2020 provide for a prohibition on any residential tenancies. While the Act specifically prohibits residential rent increases and prevents landlords from terminating residential tenancies during the COVID-19 crisis for an initial three-month period from 27 March 2020. This has now been extended to 20 July 2020.  The legislation makes no specific reference to commercial tenancies. However, due to an opposition amendment to the Bill, it does contain a prohibition on “any proposed evictions” in all tenancies.  Commentators have suggested that this provides for an inadvertent moratorium on forfeiture of commercial tenancies. The Courts have yet to provide firm any guidance.

This uncertainty is very unhelpful but, at a practical level, forfeiture is a less attractive option to landlords in circumstances where the tenant will be discharged from its ongoing obligations under the lease. Please see our recent article on the inadvertent moratorium on forfeiture here.

From the tenant’s perspective, there are some options available.  We have issued advices regarding the doctrines of frustration and force majeure here, here and here. There has also been a recent injunctive case which gives guidance to companies in the context of the recent legislation.

Similarly, there are remedies are available to clients with regard to protective measures under examinership and disclaiming onerous leases.

Please contact Gráinne or Ger if you have any queries.