With many tenants seeking rental holidays most landlords may be shaking their heads over a loss or reduction of income for one, two or maybe more quarters.
Tenants are pressing for urgent answers to their requests but one group of landlords should take special care at this time; that is those whose tenants have guarantors.
That is because, unless they are careful, the landlord who rushes to agree a reduction may find himself losing not just one potential source of income but two.
There are two things to consider.
First, they might unwittingly agree to vary the lease so that the ability to recover from a tenant at a later date is lost, because such a variation would also release the guarantor to the same extent. If you want to preserve the right to recover from a guarantor a landlord must make sure that this right to indemnity is not lost. This is not a problem with leases that have been executed as deeds unless a deed of variation is concluded.
Secondly, in order to preserve the right to pursue a guarantor, or indeed an original tenant if they have not been released from liability, a landlord must serve a notice under section 17 of the Landlord & Tenant (Covenants ) Act within six months of any fixed sum falling due, and fixed sum can include service charges. Any failure to serve on the guarantor within that time will see the landlord lose the right to pursue the outstanding sum from the guarantor.
Landlords should therefore take care how they agree to show consideration to their beleaguered tenants and should make careful diary notes on a rolling basis as to when it might be necessary to serve their section 17 notices.
We’re here to help
We appreciate that it is an uncertain time for commercial tenants and landlords alike, but we’re here to help. Our property litigation team is fully equipped to advise you on your rights and obligations during the pandemic, and beyond. Our legal services are operating as normal, with all of our lawyers able to work safely from home.
Nick Cox is a partner and head of Willans’ property litigation team. He deals mainly with disputes over commercial properties. Independent guide The Legal 500 UK references his “common-sense approach, high knowledge levels and excellent overall service”.
We’re regularly updating our website with more COVID-19 legal insights, so keep an eye on willans.co.uk/covid19 for the latest legal perspectives relating to the coronavirus.
Private residential landlords have faced a tough couple of years with changes to the tax regime, increasing obligations, issues with recovery of unpaid rent and recently the outright ban on…
Buy-to-let properties are a popular investment for private individuals and large-scale investors alike. For many, those buy-to-let properties are an important part of their capital investments and regular income. As…
Over recent years more and more people have invested in residential property so that they may rent it out. Whether you became a landlord for a capital return on the…
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL cookies.
This website uses cookies to improve your experience while you navigate through our website. Out of these cookies, the cookies that are categorised as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyse and understand how you use our website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies but it may affect your browsing experience on our website. You can find our cookie policy here.
Necessary cookies are absolutely essential for our website to function and enable core functionality such as security and accessibility. These cookies do not store any personal information. You can block these cookies by changing your browser settings, but this may affect how the website functions.
We use performance cookies such as Google Analytics to help us count the number of visitors and to see how visitors move around our website when they are using it. This helps us to improve the way our website works, for example, by ensuring that users are finding what they are looking for easily. The cookies collect information in a way that does not directly identify anyone. For more information on how these cookies work, please see our cookie policy.