Landlords and tenants must work together in the face of coronavirus, The Irish Times, March 25 2020

Unprecedented threat to investments and businesses

Sean O’Neill
Director, TWM

We are living through unprecedented times. In effect cash flow has stopped for most sectors of the economy. In general in times like this, there is a dip, a trough and a recovery. In this case the dip has been immediate, the trough is uncertain but will last a number of months and for most the recovery is likely to be relatively quick as there will be a push to get back to business globally.

Landlords and tenants will be keen to get through this while protecting their investments and businesses. This can happen in a fair and balanced way. With this in mind it is useful to look at the processes landlords and tenants can use to navigate difficult economic times together.

Landlords’ perspective – protecting the investment

For a commercial landlord, investing in real estate is all about the income return and the associated risk. Apart from location, the risk involves the strength of the tenants, the level and sustainability of rent being paid and the length of lease. The most valuable commodity is a long-term lease to a blue-chip tenant paying a market/sustainable rent in a prime location.

Landlords spend significant amounts of capital in acquiring assets based on calculated risks. Among other matters, these calculations are based on the financial strength of the tenant and the lease agreement under which they occupy the asset.

Leases generally contain conditions around payment of rent, insurance and service charge, interest on late payment, keep open clauses in shopping centres, forfeiture for non-payment etc. Therefore when assessing options commercial landlords will revert to analysing the ability of the tenant to pay and the legal agreements in place.

The landlord will want to be fair but will need to be sure that any decisions are fully justified and protect the investment and the interests of their other stakeholders. They will also want to be sure that in return they are treated fairly by their tenant.