COVID lease issues – When can a lawyer help?

You might have noticed that there’s been a tsunami of COVID rent relief-themed publications coming out from both lawyers and the general media over recent months.

With legislation being made on the run across the states and territories, for those involved in commercial leasing it’s felt like the ground has been shifting on an almost daily basis.  Managing agents in particular have been scrambling to keep up with the practical and legal implications of the COVID-19 restrictions and their impact on Victorian businesses.

Now that the dust has settled, it’s clear that for the majority of leases, rent relief arrangements can be made without the need to involve lawyers. This is a great thing – when the discussion is prompted by a lack of funds to go around, the last thing landlord and tenants need to be worrying about is funding legal advice, and thankfully Victoria’s commercial tenancy relief scheme (“CTRS”) is relatively user friendly.

However, there are a few situations when you might want to consider checking in with our experienced leasing team at Moores. 

1. You’re not sure of your rights

There are fairly complex qualifying criteria for the CTRS, particularly for tenants who are part of a corporate group. 

If you’re a tenant who’s not sure of your rights and you want to ensure your request to the landlord for rent relief is put in the strongest possible way, it would be a good idea to seek some preliminary guidance.  We can design a scope to suit your specific needs – this might include support with preparing an initial approach to the landlord, or it might be as simple as a brief phone discussion.

Similarly, landlords may want to know where they stand legally with regard to a request for rent relief from their tenant – money is tight across the board, and many landlords are concerned to ensure that the deal is fair and that tenants are not taking advantage due to a misunderstanding of the scope of the CTRS.  We’ve certainly seen a few of these!  Again, the scope of work can be tailored to the landlord’s specific needs – from a brief telephone advice to a written piece detailing recommended actions.

2. There’s a rent deferral involved

A straightforward rent waiver doesn’t require any formal documentation – a letter or even an email will do.  If rent is being deferred, however, we would recommend chatting with a lawyer to work out whether the arrangements you’re making need to be documented in a deed of variation. 

Doing a deed of variation benefits both parties by minimising the chances of someone claiming that the arrangement is not enforceable or disputing the terms of the deal made. 

A deed of variation may need to extend the lease to allow time for the rent to be repaid while the lease is still in place.  No tenant wants to be paying rent on a premises after they’ve moved on, and no landlord wants the lease to end while there’s still deferred rent to be paid. Sitting tenants tend to have a greater motivation to pay rent compared to departed tenants. 

Investing in a deed of variation up front greatly reduces the chances of a costly dispute down the track, saving both money and stress.

3. Subleasing or licensing is on the table

With so many workforces making the transition to remote working, it’s inevitable that many businesses will be considering whether they need to retain all of their pre-COVID leased space. 

One of the most obvious ways for downsizing tenants to deal with this issue is subleasing or licensing – getting a third party in to occupy your surplus space.  We’re starting to see this happen in the office market already, and we’re expecting to see a lot more of it over the coming period. 

Tenants or landlords looking at this type of situation should speak with an experienced leasing lawyer early to ensure that they know what’s permitted under the terms of the existing lease, and that the sublease/licence is properly documented and enforceable.

4. Tenant wants out

It’s inevitable that some tenants will be looking to get out of their leases altogether.  They might approach the landlord to talk about a surrender, or they might just walk away. 

For tenants, speaking with a lawyer first will ensure that you minimise the chances of a claim being made by the landlord and that you don’t expose yourself to unnecessary financial risk.  For landlords faced with this situation, getting advice early will help to avoid costly mistakes in dealing with the tenant’s actions.

If the parties agree on the tenant walking away, it is essential that this is documented in a deed of surrender.  From the tenant’s point of view, this ensures the landlord can’t chase you later for rent or other losses.  For landlords, it ensures that you are free to re-let the premises without risk and recommence your income stream as soon as possible.  An experienced leasing lawyer can help you to properly document the surrender and avoid these issues.

How we can help

If you spot an issue of concern in this list, feel free to reach out to our expert team of lawyers.  We’re regularly working with clients on similar issues and we can get you the help you need, when you need it. For more information or advice, please do not hesitate to contact us.