Commercial landlord and tenant rent concession payment plan

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What's a commercial landlord and tenant rent concession payment plan and when do you need one?

Use this template letter where a commercial landlord and tenant have agreed that the tenant’s rent payment obligations are amended, temporarily, for a specified period of time only. (A permanent agreed change should be captured by a deed of variation to the lease. This template will not suffice for that.)

This document is not for use by residential landlords and tenants. Please see the separate payment plan template for residential tenancy arrangements.

The template is appropriate for a rent concession arrangement lasting up to 6 months. It is principally designed to cover a scenario where a tenant is struggling financially and is temporarily unable to meet its full rent obligations under the lease. Rather than treat this as a breach of the lease, which it would otherwise be, the parties have agreed that a compromise position will be acceptable to the landlord.

However, the template also makes clear that if:

  • the tenant materially breaches any other terms of the lease; or
  • the tenant’s difficulties deteriorate to the extent that the tenant becomes unable to trade (i.e. becomes insolvent),

the compromise agreement contained in this letter will cease immediately.

You’ll see that this template caters for a number of rent concession scenarios:

  • Spreading out the payments: Agreement that rent can be spread out and paid more frequently than every quarter, e.g. monthly
  • Reducing the amount of rent that is due: This may be appropriate in a situation where the tenant is not able to fully use the property for a period of time. (The Covid-19 pandemic is a good example of where commercial landlords and tenants reached agreement on rent reductions because tenants had to close their businesses and were unable to trade and generate revenues)
  • Suspension of the rent for a period of time, no repayment obligation: Often called a ‘rent payment holiday’ or rent-free period, where the tenant is not obliged to make up the unpaid rent; and
  • Suspension of the rent for a period of time, WITH repayment obligation: but the unpaid amount must be collected later on (often called a ‘moriatorium’ by the experts).

You’ll need to identify and complete the recommended wording that applies to your intended agreement terms.

If the lease agreement had a guarantor, the guarantor, as well as the tenant, will need to sign it too.

What else might you need?

If you have any questions about this template or would like to talk to an expert about the circumstances in which you may be creating it, our speak to an adviser service is perfectly placed to help you.

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