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SIPP/SSAS commercial property tenant concessions warning

11 November 2020

Dentons Pensions has warned landlords of the risks they face if they provide rent concessions on commercial property without specialist guidance.

The Covid-19 pandemic has caused significant challenges within the UK commercial property market, with many offices, hospitality venues and retail premises left empty during lockdown. However, Dentons said that while property tenants may have automatically expected some form of rent concession during this period, it should “be viewed in the context of their business in particular” and its ability to meet its ongoing obligations under its lease.

According to Stephen McPhillips, technical sales director, Dentons (left), without adequate discussion between both parties, some tenants will have taken the opportunity to sidestep their obligations under their leases, regardless of whether there was a financial imperative to do so.

McPhillips said: “Sadly, judging by recent press reports, it seems that some large corporates have sought to act in this way at the expense of their rather unfortunate landlords.”

As the nation contends with a second lockdown, Dentons has urged SIPP and SSAS trustees acting as landlords of commercial properties to engage with their tenants.

The pensions specialist said that when considering a request for rent concession from a commercial property, landlords should consider whether the tenant can reasonably be expected to pay its rent in the short term and if a rent concession is granted, how long it should last. If the tenant is a connected party, landlords must also question whether that concession is commercial and along the same lines as would have been granted to an unconnected party.

David Fox, director of sales and marketing, Dentons Pensions, commented: “At a time when we are all facing challenges both at an economic and social level, there are a number of businesses trying to understand their options and their futures. This led to an increase in commercial property tenants seeking to engage with their landlords in order to come to a temporary agreement that helps both parties.

“Using our knowledge of HMRC practice and our experience, we have been able to provide guidance to anxious landlords across our commercial property book, to ensure that short-term and long-term obligations can be met.”

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