Law in the Time of Coronavirus
Belinda Solomon, Partner at Brecher LLP discusses how the legal process has not stopped and adapted…somewhat
Cast your minds back to the beginning of 2020. Office lettings were generally busy in the legal world. Rents (particularly in London) were continuing to rise, and the threat of everyone abandoning the UK due to Brexit (remember that?) had not yet materialised. If Brexit had not killed off the busy office market, then we all thought that nothing could.
How wrong we were. By the end of the first quarter of 2020, the UK looked like some sort of post-apocalyptic Hollywood film set. It was not just retail and restaurant operators who had shut up shop but every occupier in the UK had closed their doors and hidden away at home to avoid the dreaded COVID-19 virus. Just months earlier, we had seen images of China on the news, building new hospitals to house all their COVID patients, people spraying disinfectant over the roads, and everyone wearing masks. All of us thought “How terrible. I’m glad it’s far away” and carried on with our lives, little realising that we were weeks away from the same fate. When it arrived on our shores, those people unlucky enough to catch it, were actually named on the news. Remember when we only had 3 cases?
Since that time, everything seemed to come to a standstill. Well, not everything - it takes more than that to stop our legal documents from marching on regardless! Leases continued to run, incurring rent, service charges and insurance payments. Break dates didn’t move. Alterations still needed consent. Lease renewals still had a statutory timetable. Most occupiers didn’t want these things. We all wanted everything to stop and continue once life had returned to normal but that’s not how it works. Landlord’s still had their loans to repay and their investors to keep happy so they needed their rents to be paid regularly and on time.
CALL FOR SUPPORT
Clients started calling me to ask for suggestions so that they could put proposals to their landlords, using all manner of approaches to appeal to their better nature. Tenants were in an impossible position. They had no legal way to stop paying rent even though the pandemic prevented occupation and use of the premises. Force majeure clauses are rarely used in leases and rent cesser clauses cannot be triggered by closure due to a virus (unless you have unusually wide-ranging insurance provisions). I did try and insert a pandemic rent cesser provision into a lease I was negotiating during this period. My proposal was met with a response from the landlord’s lawyer which would have been more appropriate to my saying “I’ve murdered your dog and left it in your bedroom”. I was scouring leases to see if there was anything we could use or offer to give up in exchange for a rent holiday. Who else could they let the property to anyway? It was only going to be a few weeks and then everything would be back to normal. Wouldn’t it?
Then help arrived from, of all places, the Government. A new law meant there was a moratorium on landlords forfeiting leases for non-payment of rent or enforcing statutory demands for 3 months. Hooray. That was plenty of time for normal service to resume. And then it wasn’t. But it’s OK, we now have until the end of September…
To help the situation between the parties, the Government launched a code of practice for the negotiations. The code of practice is supposed “to encourage commercial tenants and landlords to work together to protect viable businesses”. Tenants are encouraged to pay their rent whilst they could and landlords are urged to provide support to businesses if they are able to do so. So far, so sensible. The downside is that the code is voluntary and there are no sanctions for failing to adhere to it. One of my clients was called “a terrorist” when quoting the code at an uncompromising landlord.
REVIEWING THE OPTIONS
Now that we have a bit of breathing space on payment of rent and the threat of forfeiture, occupiers are looking for other options in their leases. Do they need all this space? Who needs meeting rooms now that everyone has learned how to Zoom! Furthermore, the office layout is all wrong if we need to social distance. Subletting needs to be considered. Alterations need to be planned. Deeds of variation of leases need to be drafted.
That’s when the glass-half-full brigade woke up. Serviced office providers saw a rosy future for themselves in the post-pandemic world where flexible space would be ideal so started looking for additional premises. Others started thinking about moving to new premises which would be more suited to social distancing with new germless surfaces, anti-bacterial wipes on tap and hand-sanitizers throughout. Lots of new requirements were proposed:- improved air conditioning, paper coverings for toilet seats, lots of bicycle racks, wide passage-ways so everyone can avoid each other with one-way systems round the office floor.
LEGAL GOES DIGITAL
Throughout this period, we property lawyers have been lucky (?) enough to continue our work from home. We have had a few little obstacles to overcome. We use a lot of paper. Leases in particular are not brief and frequently run to 80 or 100 pages. I have had to review everything online and that has proved quite a challenge especially when all the definitions are at the front of an 80 page document and my printer stopped working at the very thought of using all that paper.
After a shaky start, we were able to undertake searches again. Local authority, highways, utilities. Notice clauses in leases and contracts were amended to allow for the service of email notices and accepted without the usual sniffy response from the other side. Even the Land Registry decided to be helpful with extensions to priority periods and
execution of documents. Deeds will now be accepted using scanned signatures if the Mercury route is followed. This allows the signatory (who must have received the entire document by email) to print off and sign the signature page, then scan or photograph just that page and send it back with the rest of the document. It may sound like a lot of faff but believe me, it is a huge concession.
Furthermore on 9th July, the Land Registry announced it will be accepting witnessed electronic signatures for registrable deeds in the near future. This is a little more tricky as it requires the signature to be uploaded onto a specialist cloudbased electronic signing platform which the signatory would access via a link. Ultimately, the goal is to allow a “qualified electronic signature” which will rely on technology for verification of the signature.
SO, WHAT’S THE MORAL OF THE STORY?
I guess it is that we are all adapting to these horrific circumstances. With the help of technology, concessions by those on all sides of the property profession and an eye to the future, we are all soldiering on. We in the legal world
can deal with any property transaction which comes our way. We can undertake due diligence, negotiate documents,
have virtual meetings and then get it registered at the Land Registry and you won’t even know whether I’m in the office or on a beach in Antigua (sadly not). It takes more than a global pandemic to knock us off our stride.
Stay safe everyone.