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Coronavirus and Commercial Leases - What Universities Need to Consider

on Friday, 20 March 2020.

As coronavirus (also known as COVID-19) continues to dominate the headlines, we explore its effect on commercial properties, whether a university is either a tenant or landlord, and answer your most frequently asked questions.

This situation is unprecedented and while we know many universities have already closed or are about to close for the foreseeable future, there may still be premises which you occupy or alternatively own and rent out to third parties, where you need to have regard to the occupational provisions.

Coronavirus Legal Advice

Is additional cleaning or maintenance of the property included under my lease?

As recommended by the government guidance, individuals should maintain a high standard of hygiene by washing hands. Some employers are also choosing to undertake more rigorous cleaning of premises.

It is common in a commercial lease for there to be obligations on a landlord to provide services to its tenants, one of which could be cleaning or maintenance of common areas (such as shared toilets and kitchens).

Under most leases, there won’t be an obligation on the landlord to provide any additional cleaning or maintenance beyond the norm, but it would be worth checking your lease to be sure. Clearly what might become the new "norm" in the future is something to consider.

If additional cleaning or maintenance of the property is carried out, can this be included within the service charge payment under the lease?

As stated above, if you are a landlord that has obligations under the lease to provide for cleaning or maintenance for the whole or common parts of the property, it may be possible for you to claim for the expenses incurred in taking extra care that those areas are clean. This would be done by charging for the maintenance/cleaning through the service charge, which is recovered from the tenants.

Whether this would be recovered would depend on the wording of a service charge clause. Often, additional services are at the discretion of the landlord. The extent to which they are recoverable depends on whether those costs are reasonable and properly incurred in accordance with good estate management principles. As mentioned above, more regular and rigorous cleaning could well become the new normal in the future.

Are there any health and safety obligations that the coronavirus affects?

The relevant law in this area is the Control of Substances Hazardous to Health Regulations 2002 (COSHH). COSHH can apply in respect to viruses, which could potentially include the coronavirus. Under these regulations you could have obligations such as completing risk assessments and initiating control measures.

You should check your lease to see who is responsible for the disposal of waste, which is likely to have been drafted with non-hazardous waste in mind. If someone at the property is diagnosed with the coronavirus, you may have to consider how to dispose of items they have come into contact with, particularly tissues.

Under my lease, I am obliged as tenant to ensure that there is 24/7 security of the property and I cannot leave it vacant for extended periods of time. What happens if the building is locked down because of coronavirus and this cannot happen?

Again, the terms of the lease will dictate exactly what the obligations are. However, if as tenant, you are required to leave your premises vacant for an extended period of time, you will want to ensure that they are secure. Best practice will be to keep your landlord and your insurers updated on what is going on, especially if the property has to be left vacant.

I'm about to undertake some works to my property. I have a licence for alterations from the landlord and I am obliged to finish the works within six months. However, there is an interruption to the supply chain and I cannot get some of the required materials in time to meet this deadline - will this time be automatically extended?

In most licences, there is a provision stating that the works period is extended if the circumstances of the delay are outside of the control of the parties. This is known as a force majeure clause. However, it will depend on the specific wording of your licence as to whether a delay caused by the coronavirus would result in an extension of time or not.

Again, as tenant, the best thing to do is speak with your landlord as soon as you see any potential issues so that you have the maximum amount of time to deal with them. Given the unusual nature of the interruptions being created by the coronavirus, we would hope that there would be a degree of common sense adopted, not least because any works approved as part of a licence for alterations would normally be approved by a landlord on the basis that it helps the residual value of the landlord's interest, as well as serving the tenant's needs.

If you cannot get a formal variation to the licence agreed by way of a further deed, then the minimum we would recommend is to get an exchange of emails with the landlord agreeing to whatever extension might be agreed. Given the current state of affairs, it maybe that a landlord would agree a certain extension, with a further review in due course.

These are extraordinary times. While documents, including leases, cater for the vast majority of instances, it is precisely in times such as this, it is good to keep an open line of dialogue between the parties. Following on from the initial dislocation we are all experiencing, with most of us working from home, there will be a subsequent phase where business life will begin to return to normal. There will inevitably be some teething troubles but we would hope that with a co-operative approach landlords and tenants can work together to make sure premises are clean, safe and good places within which to work.

The above reflects guidance as at 20 March 2020. We will continue to update this as the situation develops.

For further information on how the coronavirus affects commercial leases, please contact a member of our Real Estate team on 07468 698 944, or complete the form below.


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