Many businesses over the past few days will have found themselves in the position of having to quickly close their doors as they do not provide an essential service. For any business owner in this position, now is the time to stand back and make sure that you have done everything required of you from a property and insurance perspective. You need to ensure that you have closed the door and complied with all obligations required of you, safely.
If you hold the property pursuant to a Lease or Licence, this is the first place to look. You should find that most of what is contained in your Lease or Licence is common sense and that you have already complied with it’s requirements.
Am I breaching the terms of my Lease by closing the Premises?
Your Lease or Licence will oblige you to comply with Laws. If you are operating a non-essential business from your Premises, then you must comply with the obligation to close and in doing so, you will not be breaching the terms of your Lease.
What is the position if I have a Keep Open obligation in my Lease?
Each Keep Open clause is different. Many Keep Open clauses will be caveated so that they do not apply if it is necessary to close by Law. Other clauses will have a caveat whereby there will not apply if the Tenant closes for reasons outside its control. Read your Lease/Licence. If you are in any doubt, take legal advice in relation to the implications of the Keep Open clause.
Can my Landlord terminate my Lease if I close?
Some Leases give the Landlord the ability to serve a notice and terminate the Lease arrangement if the Premises are unoccupied. It is hard to see how any Landlord and Tenant could have foreseen this applying in a situation where there has been a requirement by Law to close the Premises. Once again, check your Lease and take advice on what communication, if any, you should have with your Landlord in this regard.
Many Leases will provide that notices are to be served by sending them to the Premises. If there is no one in the Premises, it may be prudent to notify your Landlord in writing that for the period of closure, notices should be served at an alternative address.
My Lease contains an obligation on me not to leave the Premises unoccupied without notifying the Landlord.
Most Leases will put an obligation on a Tenant to either not leave a Premises unoccupied or to notify the Landlord should they wish to do this. Some Leases will also require you to give the name and telephone number of someone who can be contacted in the event of an emergency. It is extremely important that you notify your Landlord of the fact that your property may be wholly or partially unoccupied, whether your Lease obliges you to do so or not.
Are the Premises insured whilst they are closed?
Most Leases provide that the Landlord will insure the Premises subject to the Tenant discharging the premium. They will also oblige you to not do anything which may give rise to an increase in premium for either the Premises or any Centre of which the Premises forms part. If the Premises remain unoccupied, this is a material change in circumstances and both the terms of the Lease and the Insurance Policy itself may provide that this must be notified to the Landlord and Insurer.
What can I expect?
It is quite likely that your Landlord and Insurer will ask you for further information in relation to the Premises so that it can assess whether or not there is an increased risk by virtue of it being closed. This may give rise to an increase in premium. Whilst any increase in cost may be unwelcome in the current climate, any such payment required should be discharged. The Insurer may have practical steps that it requires you to take to safeguard the Premises.
What are the consequences of me not notifying my Landlord?
Most Leases will make a Tenant fully responsible for any insurance proceeds which an Insurer refuses to pay due to the Tenant’s act or default. This can extend to not only the Premises occupied by the Tenant but also any Estate, Development or Centre of which the Premises forms part.
Do I need to notify my own Insurer?
Yes, you should do so immediately. You will have contents, fittings and potentially stock in the Premises. Should something happen to these requiring you to make a claim in the future, it may be regarded as material that the Premises were unoccupied.
My Premises are in a Centre. Is there anything else that I should do?
Yes, you should check the Tenant Handbook and any regulations issued by the Landlord or Management Company. If your Premises is in a Centre that it is still open as there are other premises providing essential services, there may be steps that Centre Management can take to help protect your Premises for you and reduce the risk.
I own my own Premises. Do I need to worry out the obligations discussed above?
Yes, you should consider if they still apply to you. Even if you own the freehold interest in your Premises or a long leasehold interest, it is likely that there are obligation on you in your Lease or some other agreement governing your occupation of the Premises, such as a Deed of Covenant or Lease of Easements.
Even if you own your own stand-alone building, the comments above relating to Insurance will still apply and should be followed.
Can I allow an Employee attend at the Premises to check that it is secure?
Do be careful of any practical steps that you think you should take or you are being asked to take, where this would involve an employee attending at the Premises to perform what is essentially a non-essential service. You may not be covered by insurance if something happens to your employee on the Premises. In addition, it may lead to a claim under health and safety law, tort law (including personal injuries by way of negligence on the part of the employer) and it could give rise to whistleblowing. You should take advice before considering this.
What do I need to do today?
Today you should:
- Call your Insurer
- Notify your Landlord/Management Company
- Review your Lease
If you need any further advice in relation to obligations under your Lease or your obligations as an employer, please contact Jackie Buckley firstname.lastname@example.org, Breda O'Malley email@example.com or any member of our Property or Employment Law department.Back to Full News
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About the Authors
Jackie is Head of the Property team at Hayes solicitors. She is a highly experienced adviser to clients in the banking, public and retail sectors on all aspects of the sale, purchase, leasing, development and financing of properties. She has extensive experience of advising landlords and tenants in insolvency situations and has advised in recent high profile examinerships.
Breda practises in both Employment and Commercial Law and is Partner and Head of the Employment Law team at Hayes solicitors. Breda has trained and qualified as a mediator with the UK based, internationally renowned Centre for Effective Dispute Resolution (CEDR). Breda practices as a mediator of commercial, employment, boardroom, charity trustee and shareholder disputes.