How does a rent suspension clause work?
A lease or tenancy agreement may contain a clause which suspends the rent in the event that the property becomes uninhabitable. The clause may state that there should be a suspension of the whole of the rent, or sometimes part of the rent, subject to how much of the property is usable.
Under what circumstances can you utilise a suspension of rent payment clause?
In the case of Baillie v Savage [2018] EWHC 3035 (Ch), the tenant had reported that a garden wall in the property was bulging. Eventually, the garden wall collapsed on to the path. The tenant instructed a structural engineer to assess the premises, who opined that the property was not safe to reside in.
The combination of the previous damage and potential for further damage, which could potentially be dangerous to the tenant, was enough to invoke the rent suspension clause.
The tenant was awarded judgment, interest and a sum on account for costs.
Consideration of the limitations of the suspension clause
It is important to ensure that the rent suspension clause is not limited to engagement in respect of specified events, such as fire or flood damage. If the clause contains a restriction of this nature, it may be the case that the reason why the tenant is calling for the rent to be suspended will have to be carefully scrutinised.
What about other payments due under a lease?
Rent suspension clauses have been construed by the Courts as only applying to rent. Therefore, the clause will not necessarily apply to insurance premiums and service charge payments, if the lease stipulates that these should be paid by the tenant to the landlord. The case of P&O Property Holdings Ltd v International Computers Ltd [2000] 2 All ER 1015 determined that there should be a distinction between payment of “rent” and payment of additional “rents” when applying the rent suspension clause. The Court also mused that it would be commercially perverse to allow the tenant to use the rent suspension clause to absolve the tenant from making payment of the insurance contributions.
Things that you need to consider about rent suspension clauses
Should all or part of a property let on a lease or tenancy agreement become uninhabitable then it is important to consider:
- Is there is a rent suspension clause,
- Does the rent suspension clause stipulate that it can only be utilised in certain circumstances, and
- The evidence available to show that the property is uninhabitable.
Rent suspension due to COVID-19
As we face the unprecedented Coronavirus pandemic, some tenants may find themselves unable to utilise their premises due to the outbreak. As a consequence, many may look to secure a rent suspension for the duration of this period.
Any right to suspend the payment of rent will be set out in your lease or tenancy agreement. Your right to suspend rent will be based upon the exact wording of the document. It is very common for leases to only allow for such provisions if the premises have been damaged or rendered unusable. With the COVID-19 pandemic not causing physical damage, it is unlikely to warrant suspension of rent. In this case, tenants should check if any insurance policies they hold cover them for losses during this time.
Whilst uncommon, some leases or tenancy agreements may make reference to a “force-majeure” clause, which may allow you to suspend or delay payments to due to exceptional circumstances. Whether this applies to the current situation depends very much on the exact wording of your lease or tenancy agreement.
In relation to commercial leases that have rent linked to an entity’s turnover, the tenant will want to ensure that such a clause is carefully considered to allow for them to pay a suitable level of rent based on their new level of turnover. The relevant clause should specify the mechanism for facilitating the change in the level of rent.
With the COVID-19 situation being truly unprecedented, it is perhaps best that tenants and landlords seek to work together to find a mutually beneficial solution. Above all, safety and wellbeing should remain paramount.
Hodge Jones & Allen will continue to be here for you during the Coronavirus pandemic. If you would like advice from a specialist property disputes solicitor about your lease or tenancy agreement please call 0808 271 9413 or request a call back online.