Can my tenant claim a rent reduction if they have been unable to use the premises due to COVID-19?
As very few Leases contain a ‘force majeure’ clause, probably not. Such a clause could allow either party to say that the obligations in the Lease are suspended because of Covid-19.
To claim termination of a Lease by “frustration” is difficult. Frustration of a Lease applies where events unprovided for in the Lease significantly alter the parties’ obligations and bring the Lease to an end. It is unlikely that a temporary inability, such as a pandemic, to occupy the premises would be accepted as such a reason.
In most leases the obligation to pay the rent is only suspended, or the amount of rent reduced, where there has been “damage” to or “destruction” of the premises by an insured risk or, in some cases, an uninsured risk. As Covid-19 itself does not cause physical damage to or destruction of premises, these provisions are unlikely to be engaged.
It should be noted that the terms of a Lease and the length of the interruption to occupation may be relevant.
As a gesture of goodwill, a Landlord, may choose to defer, reduce or entirely suspend the rent for a period to avoid tenant insolvency. Any such agreement should be documented should a dispute arise.
At the moment commercial and residential tenants who miss rent payments due to the impact of the coronavirus pandemic are protected from eviction with the relevant legislation for England, Wales and Northern Ireland included in the Coronavirus Act.
Section 82 Coronavirus Act 2020 prevents any forfeiture between 26 March 2020 and 30 June 2021, whether by proceedings or peaceable re-entry, of the vast majority of commercial leases for non-payment of any sums due under the lease. Those sums remain due and only an express waiver will waive the right to forfeit when the restricted period ends
With lockdown easing, the current provisions in respect of landlord and tenant law have the possibility of being reviewed.