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At Forum Law we have seen an increase in enquiries from landlords and tenants seeking to enforce or review their obligations under a commercial or retail lease.
Before granting a lease, a prudent landlord will take care to evaluate the prospective tenant's financial capacity. Nevertheless, a tenant's financial capacity may change after the lease has been signed and most landlords take little interest. While this may usually not be a problem, in times of economic difficulty it is in the landlord's interests to pay closer attention to his tenant.
A landlord may be able to minimise risk by:
Where termination of a lease is unlikely to result in finding a new tenant a landlord may agree to:
Other options that may be considered include:
Where changes are made to your agreement it is important to use a deed to document this. Using a deed will make the changes confidential, which may be important if you have multiple tenants in a building and will prevent the changes applying to future tenants as it will not vary the lease itself. A deed should:
If solvency is an issue, include a provision that a failure to make payments under the Deed is evidence that the tenant is unable to pay its debts and entitles the landlord to apply to wind up the tenant.
If the breach by the tenant would entitle the landlord to terminate the lease, the right to terminate should be expressly reserved in the Deed and the tenant required to give an acknowledgment that a termination by the landlord under the Deed entitles the landlord to terminate the lease and that the tenant agrees that they will not be able to make an application for relief against forfeiture in those circumstances.
If there has been claim by tenant regarding the rights of the landlord to take action, the Deed might also contain a release by the tenant of such claims.
The Deed might make the concessions conditional on the tenant providing specific financial information and reports on a regular basis both during the period the Deed applies and also continuing thereafter.
If additional security is available (for example, directors' guarantees or third party guarantees), the Deed could be conditional on that additional security being provided.
For tenants approaching a landlord for some form of concession it is a good idea to: