We explore some key issues relating to the impact of the outbreak of coronavirus (COVID-19) on the commercial property sector in Gibraltar.
Many leases will require rent payments to be made in advance on a quarterly or monthly basis and, unfortunately, they do not permit tenants to withhold rent. It is important to review the provisions of existing leases in light of adverse impacts on businesses as a result of COVID-19 which may lead to a breach of the lease provisions. Such a breach could entitle the commercial landlord to exercise its right to seek damages or forfeit the lease (albeit relief from forfeiture may be available from the Court).
HM Government of Gibraltar have this week announced a number of measures to assist businesses operating in the hospitality, leisure, catering and distributive sectors (the Relevant Sectors). The Gibraltar Chamber of Commerce and the Gibraltar Federation of Small Businesses welcome these measures and confirmed with HM Government of Gibraltar that ‘distributive sector’ includes shops and general retail (excluding supermarkets and grocery stores).
These measures include:
- Where HM Government of Gibraltar is the direct landlord of businesses in the Relevant Sectors, all commercial rents payable in respect of the second quarter of 2020 will be waived.
The following measures have also been announced with a view to encourage commercial landlords to provide flexibility during this challenging period to tenants in the Relevant Sectors:
- Commercial landlords will be required to pay tax at a rate of 50% on the gross rent without deductions where they do not waive at least 50% of the rent due in the second quarter of 2020 for tenants in the Relevant Sectors.
- However, these provisions will not apply where commercial landlords agree to waive the rent due in the second quarter of 2020 and extend the commercial lease by a further three months.
- Tenants in the Relevant Sectors who are not afforded flexibility by their commercial landlords will be allowed a deduction against their tax liability of three times the amount of rent paid.
HM Government of Gibraltar has announced that all business rates for the second quarter of 2020 will be waived for businesses in the Relevant Sectors. Payments for water and electricity charges incurred by these businesses for April 2020 for will be deferred, and instead payable over the next 12 months.
For more key issues to consider, please see the full article. Our ability to assist clients during these challenging times remains unaffected. Please feel free to contact us for legal advice relating to commercial property in Gibraltar.
For landlords and tenants alike, any agreement relating to a rent reduction or any flexibility in payment of rent should be carefully documented to avoid any unintended consequences in respect of the rest of the provisions in the lease agreement.