If your business has been affected by the pandemic, chances are that you have already taken steps to pare back your outgoings wherever you can. For those renting business premises, this will likely have included some negotiation with your landlord.
If you have tried negotiations and you aren’t getting anywhere with your landlord, this blog can help you understand why they might not be offering the breaks you need. It might help you to approach negotiations from a different angle. If that doesn’t help you make progress in your discussions, there is a new lockdown-friendly online mediation service that could work – read on to find out whether it might be suitable for your business.
Why won’t my landlord help me?
Although many landlords have been cooperative when it comes to negotiating temporary rent reductions or even rent-free periods for struggling business tenants, not all have been so accommodating. It doesn’t always mean they have willingly chosen to be aggressive. There are three common causes of a difficult landlord that you might not have thought of:
1. Your landlord is getting squeezed by their own landlord
It’s common for commercial properties to be let and sublet in a chain, so your landlord may themselves be a tenant with their own rent to pay to a landlord higher up. If they are under pressure, it will be harder for them to cut you some slack in turn.
2. Your landlord couldn’t get a mortgage holiday
There is no obligation on lenders to grant mortgage holidays to commercial landlords. If yours has been unlucky, they might still be on the hook for payments and facing repossession if they fall too far behind.
3. Your landlord is struggling to meet the building’s expenses
Even if they are not a tenant themselves, your landlord may well have ongoing expenses that cannot be suspended. Maintenance and building security are particularly important in empty premises. Depending on the terms of your tenancy, your landlord may well be paying out of pocket for these sorts of things.
It is because of practical problems like these that negotiations with your landlord can be tricky. How do you strike a fair balance when you are both in difficulty? Popular solutions include a change in the rent due date (eg from quarterly to monthly to help with cashflow), adjustments to any services provided or even rent reductions or short rent holidays.
Is mediation the answer?
If you are having trouble negotiating a solution with your landlord that works for both of you, you might benefit from mediation. This is when you get together with a neutral third person (a mediator) and they help you both find a way forward. It does cost (the mediator charges a professional fee), but might be suitable for you if:
1. you have tried talking to your landlord and aren’t getting anywhere;
2. your tenancy isn’t ending soon so it’s important to maintain a good relationship with your landlord; or
3. your tenancy is due to end soon, but it is important to your business that you are able to stay in the same premises;
4. unless you can agree to some kind of compromise, the consequences will be serious for your business, eg you might go under, or your landlord is likely to evict you as soon as the current restrictions are lifted; and
5. your landlord is willing to try it too! You can’t mediate by yourself.
A good mediator will focus on the practicalities rather than the legal rights and wrongs, so it can be very effective if the law is clear (you must pay the rent in your tenancy agreement), but the reality is very different (pandemic, enforced lockdown, global economic collapse).
Is mediation from home possible?
Yes. Normally, mediation is a face-to-face process, with the mediator acting as a go-between/facilitator, but RICS has recently launched an online mediation service specifically to help with rent problems and other property disputes during lockdown.
If you think this might be the solution you need, and your landlord is on board, they will put you in touch with a mediator who can give you a quote to get things started.
Helen Turnbull is Head of Strategic Development for the Marketplace at FromCounsel, the specialist corporate legal resource trusted by top global law firms and FTSE 100 companies. Before joining FromCounsel in 2021, Helen was Head of Content at Sparqa Legal. Having previously spent 12 years practising as a commercial and property law barrister, Helen regularly contributes her expertise to Sparqa’s blog.