Section A - Introduction
These COVID-19 frequently asked questions (FAQs) explore general practical issues that face Managing Trustees given the impact of COVID-19. These FAQs are to be read in conjunction with the general guidance on licences, ASTs and Non-residential leases available on TMCP’s website.
Section B - Frequently Asked Questions
Q1. Licences - Cancellation due to COVID-19
Q1.1 Some of our licensees have called us to cancel their use of our church hall for the time being. How should we respond to this?
A1.1. Managing Trustees across the Connexion are receiving requests from third party hirers to temporarily cancel their use of church premises. Given the Government guidance on social distancing, the groups on which so many communities rely have become impossible and cancellations are inevitable. If some or all of your licensees wish to cancel in accordance with Government guidance, the Managing Trustees may feel that have little choice but to accept while doing what they can to ensure that the group will come back once the restrictions are lifted. The Methodist Church website guidance also suggests that Managing Trustees may also feel they would like to emphasise the pastoral support that is available.
Q1.2. In accordance with the guidance on the Methodist Church website we have suspended all our Church groups. We allow a number of local community groups to use our premises under licence. Can we insist that these third party groups stop using our premises aswell? We are using the Standard Licence.
A1.2. Yes, Managing Trustees are free to make this decision and may feel that it is in the best interests of the charity to do so to follow Government guidance on social distancing and to protect third parties as well as those volunteers who would need to manage such use. Please refer to the guidance on the Methodist Church website (Coronavirus Guidance).
Under the terms of the Standard Licence Managing Trustees can suspend use/cancel sessions at their ultimate discretion on a temporary basis or end the arrangement altogether. Please refer to FAQ 2.1. Although notice is required under clause 5, in the circumstances the Managing Trustees and the groups involved could mutually agree to the notice having immediate effect.
Q1.3. The majority of our licensees have requested a break in their licence due to COVID-19. However, we have a food bank which uses our premises under licence and given the ever great need for food banks we are anxious that the building remains open so that they can continue to use it. Is this possible?
A1.3. Ultimately this is a decision for the Managing Trustees bearing in mind Government guidance and the guidance on the Methodist Church website (Coronavirus Guidance). Managing Trustees will want to ensure that they are not putting their own vulnerable volunteers in danger while ensuring that the food bank using their premises can continue its vital work.
Managing Trustees should consider the position carefully and keep it under review as the wider situation develops over the coming weeks and months. Can the Managing Trustees make arrangements to ensure those volunteers or other church members who would be “overseeing” the use of the premises by the food bank are not classed as “vulnerable” in accordance with Government guidance? Please also keep under review the need for use of the premises to be shared i.e. not used by the food bank exclusively.
Please refer to the guidance that is available on the Methodist Church website (Coronavirus Guidance) and the Trussell Trust website which highlights the pressure being placed on them in the current situation and “ways to help”.
Q2. Licences - How to cancel third party use under licence due to COVID-19.
Q2.1. Some of our licensees have called us to cancel their use of our church hall for the time being. We are minded to agree but how do we go about this in practice? Can we agree this informally or do we have to ask our licensees to terminate their licences and then get them to sign new licences when they return? We are using the Standard Licence.
A2.1. Legally, a contract is in place and this can be terminated under the termination provisions of clause 5 of the Standard Licence . If you terminate under clause 5 then written notice (not email) should be given. A new licence would be needed once ‘normal service’ resumes and this will be dependent upon advice from the Government.
Although the Managing Trustees may prefer the certainty of an outright cancellation of their licences, given the inherent uncertainty at this time, they may want to consider whether a more flexible approach works for both them and their licensee?
Under the Standard Licence, use is at the times specified in the licence or otherwise at the Managing Trustees’ absolute discretion. Managing Trustees may prefer to speak to their licensees informally (telephone/email) to agree to suspend their licence for the time being. Once an end to this period of social distancing is in sight, an agreement can be reached as to when the licence will start again (and the obligation to pay the licence fee). The licence would then run to the current End Date. This could be agreed by email or over the telephone with a record kept of what is agreed.
Q3. Licences – Licence fees for unused sessions due to COVID-19.
Q3.1. Some of our licensees have called us to cancel their use of our church hall for the time being. Ideally we would like to do this informally i.e. suspend use while we see what happens rather than terminating the licence altogether. If we do this, are we obliged to make our licensees pay for unused sessions?
A3.1. These are very difficult and unprecedented times and it is ultimately for the Managing Trustees to decide how they wish to proceed. Although technically you could ask your licensees to pay for unused sessions, particularly if they have asked you to terminate their licence, it is difficult to see how the Managing Trustees could expect payment in any event if you have reached a mutual agreement to suspend use.
Q3.2. Will our insurer cover the charity for lost revenue?
A3.2. It is strongly recommended that the Managing Trustees check the position with their particular insurer. The situation is changing rapidly and companies are responding to the challenges posed by COVID-19 in different ways and adapt their stance in light of developments. You may want to keep checking the position.
Q4. Leases – Tenant requests due to COVID-19
Q4. We rent out part of our premises to a business tenant who has indicated that they will struggle to pay rent going forward due to the impact of coronavirus. Do we have to release them from the lease or agree rent concessions? Can we do this under charity law and Methodist law and policy?
A4. This question has been considered by Sintons, one of the panel solicitors, along with TMCP and we confirm that it is very unlikely that the lease will give your tenant the right to be released or to withhold rent due to COVID-19 even if the premises are closed.
It is recommended that the Managing Trustees check the lease carefully and contact their solicitor if they are unsure. Please refer to the Panel Solicitor page on TMCP’s website for contact details.
These are very unique circumstances and ultimately it will be for the Managing Trustees to decide, on a case by case basis, how they wish to proceed. If the tenant argues that it has the right to terminate the lease or unilaterally vary rental payment terms you should take immediate legal advice. Please refer to FAQ 5.1 for guidance on what to consider and FAQs 5.2 and 5.3 for the Methodist perspective.
Q5. Leases – Rent payments
Q5.1 We have a number of investment properties which we let out. This income is crucial to the Mission work that we carry out. One of our tenants has sent us a letter from their solicitor requesting that we reduce the rent or allow a rent holiday. What should we consider in deciding whether to grant these types of concession?
A.5.1 Please refer to FAQs 5.3 and 5.4 for details of the charity law and Methodist points to consider.
This question has been considered by Sintons, one of the panel solicitors, along with TMCP and we advise Managing Trustees to consider the following legal points:-
- Discuss the current situation (remotely) with your tenant as soon as possible to achieve the best possible outcome. Make it clear that this is on what is known as a “Without Prejudice” basis. This should help the Managing Trustees to avoid finding themselves contractually bound to changes to the lease before they have had chance to consider the position fully, obtain appropriate advice and agree the full details. (Please also refer to the guidance on “side letters” in FAQ 5.2).
- Ask the tenant to confirm what rent concessions they want. Do they want a rent reduction, a rent discount (i.e. a rent free period), or a rent deferment (where unpaid rent is to be repaid later on an agreed schedule with or without interest)? What do they propose in relation to any service charge or other payments due under the lease? Do they also want these payments to be reduced or suspended? Do they want to pay their rent monthly rather than quarterly? When would normal payments be resumed and on what terms?
- How will the tenant’s proposals affect the Managing Trustees’ income/cash flow? Do the Managing Trustees wish to put forward any alternative proposals?
- What is the tenant’s financial position? Is there a genuine need or risk of the tenant becoming insolvent? It is recommended that the Managing Trustees ask to see financial information showing how COVID-19 is affecting the tenant’s business and whether the tenant has explored possible support from central or local Government (e.g. loans or rates relief). What are the tenant’s likely long term prospects? You can ask your solicitor or agent to help you with this.
- Does the tenant have insurance which would cover rent? Managing Trustees should also check with their own insurance.
- Did the Managing Trustees take a rent deposit when the lease was entered into which can now be used to pay rent? Please speak to your solicitor about this before using the deposit. Usually the deposit would be held by your solicitor.
- Can the tenant offer anything in return to help the charity once the current crisis starts to ease e.g.an increased rent at a later date or waiver of any right they have to break the lease? Is there a tenant’s break clause?
- Would the Managing Trustees be able to find a replacement tenant and on what terms if this tenant defaults or becomes insolvent? Can the Managing Trustees’ surveyor provide any advice on this point to help them make an informed decision?
If the Managing Trustees are uncertain about any of these points it is strongly recommended that they take advice from their solicitor, surveyor or accountant. Please refer to the Panel Solicitors page on TMCP’s website for contact details for the solicitors on the Methodist panel. For information on the panel surveyors please refer to the Panel Surveyors page on the Methodist Church website.
Q5.2 We let out shop premises to a commercial tenant. The tenant has approached us asking for a rent holiday due to the impact of COVID-19 on their business. We know they are struggling and would like to help if possible, however, are we able to do so under charity law and Methodist law and policy?
A.5.2 On 23 March 2020, the Government announced unprecedented measures to help commercial tenants who cannot pay their rent over the next three months because of coronavirus and protect them from eviction (Extra Protection for Businesses). The Government is encouraging landlords and tenants to come to a voluntary arrangement in an attempt to protect jobs and livelihoods. From the Managing Trustees’ perspective, they will be anxious to do what they can to preserve the landlord/tenant relationship so once the restrictions are lifted they know they have safeguarded future income and provided what support they can to the wider community during this time.
Accordingly, in these exceptional circumstances and in accordance with current Government guidance, charity law and Methodist law and policy would not prevent Managing Trustees from looking at options such as rent holidays. However, please bear in mind that the legislation proposed in March 2020 seeks to prevent landlords from evicting their tenants, it does not remove the liability to pay rent; payment is deferred rather than written off entirely. As prudent charity trustees Managing Trustees may be expected to ensure that payment is made once the situation improves in accordance with the Government guidance at that time. You should refer any requests to pay rent arrears in instalments with your surveyor.
However, before looking at rent holidays, the Managing Trustees may want to explore other options with their tenant. The Government has announced a whole host of ways to support businesses and it could be that your tenant can continue to pay rent which will help the charity in the short term and avoid the tenant falling into arrears. Although we understand this is not covered in many cases, it is worth double checking whether your tenant has business continuity insurance.
In tandem with the above questions, in accordance with the current guidance from the Charity Commission (COVID-19 Guidance for the Charitable Sector), Managing Trustees need to think about the long term effects on the charity:
- If the rent is not paid, will the Managing Trustees still be able to cover the insurance costs in accordance with their landlord obligations under the lease?
- Can the tenant pay part of the rent or the insurance rent?
- Speak to your surveyor to help the Managing Trustees negotiate terms that are in the best interests of the charity in these very difficult circumstances.
Managing Trustees will also need to document emergency arrangements carefully. The Managing Trustees should speak to their solicitor about putting in place what is known as a “side letter” to record the temporary arrangements that have been agreed. Please speak to one of the firms on the Methodist panel of solicitors to see whether they can prepare a suitable “side letter” for you and confirm how the Managing Trustees should proceed to agree the terms and arrange for signature given the current restrictions. Please refer to the Panel Solicitors page on TMCP’s website.
Once drafted, please send the proposed side letter and surveyor’s advice to TMCP so that we can ensure that a record is kept. If you use one of the panel firms they should be using a form of side letter that has already been approved by TMCP meaning that approval under SO 931(3) should be given without delay.
This is an ongoing situation and Managing Trustees are encouraged to keep talking to their tenants to find the best way to deal with this.
Q5.3 We have seen the announcements in the media about protection from eviction for business tenants. The tenant of our church hall is a charitable organisation that is now unable to continue with its work due to the Coronavirus. Are we allowed to be flexible in terms of rent payment? The charity wishes to keep their lease so that they can continue their work once the restrictions are lifted. They have suggested being given a rent free period or paying a reduced rent.
A5.3 Although the Government’s announcements and measures to be introduced in the emergency Coronavirus Bill focus on businesses and commercial tenants, it is difficult to see why Managing Trustees cannot follow the principles discussed in response to FAQ 5.2 when dealing with their not-for-profit or charity tenants.
Managing Trustees do however need to bear in mind the need to negotiate an arrangement that also protects the best interests of their own charity. Managing Trustees will also be experiencing difficulties due to loss of income and still need to ensure that the premises are fully insured and secure during periods of non-use.
Is there anything that your tenant can do assist you as their landlord?
- Does your charitable tenant have any insurance that could help them to continue paying the rent?
- Would any of the measures being brought in by the Government assist your tenant? Government guidance makes it clear that landlords and tenants should work together where possible, so the burden is not placed on the landlord completely. Having said that, at the moment it is acknowledged that most of the help is for businesses but this could change and Managing Trustees are encouraged to keep the situation under review.
Having considered the above, it is ultimately a decision for the Managing Trustees to make; can the Managing Trustees afford to agree a reduced rent and continue to fulfil their own obligations under the lease? Do the Managing Trustees’ finances allow for a rent free period? What would the impact of the reduced rent/rent free be set against losing the tenant and the potential delay in finding a new tenant? The Managing Trustees as prudent charity trustees should speak to their Surveyor and ensure that any decisions are made in accordance with that advice. How does your Surveyor advise you to proceed to protect the best interests of the charity?
As discussed in the response to FAQ 5.2, please ensure any temporary measures are recorded carefully in a “side letter” and forward this with the surveyor’s advice to TMCP for approval.
Q.5.4 We are Managing Trustees of a small shop that was left to the Local Church in a will many years ago. Our current business tenant runs a number of shops and has asked us for a rent holiday or reduction in the rent due to coronavirus.
What is our position if we do not agree to these concessions?
A.5.4 This question has been considered by Sintons, one of the panel solicitors along with TMCP.
If tenants default on rent or other payments due under the lease then the Managing Trustees, as prudent charity trustees would usually be expected to enforce the terms of the lease, including enforcement of any guarantees and accessing rent deposits as well as forfeiture (terminating the lease) or action in the courts for breach of tenant covenants. It is recommended that the Managing Trustees take immediate legal advice particularly as the tenant may become insolvent and rental recovery become very difficult during the current crisis.
However, as discussed in the response to FAQ 5.2, Sintons advise that on the 23rd March 2020 the Government announced that all commercial tenants in England, Wales and Northern Ireland who miss rent payments (including service charge and insurance) are to benefit from a Government ban on landlords evicting their tenants. This will be in effect until 30th June with a government option to extend.
It is strongly recommended that Managing Trustees considering taking legal action against their tenants speak to their solicitor to see whether they need to take action now to enable them to enforce the terms of the lease in the future, once the restrictions are lifted. However, please also consider the responses to FAQs 5.1 – 5.3 above to help you decide what course of action would be in the best interests of the charity.
Q.5.5 We are Managing Trustees of a small shop that was left to the Local Church in a will many years ago. Our current business tenant runs a number of shops and has asked us for a rent holiday or reduction in the rent due to coronavirus.
If we do agree to rent concessions, how should we proceed?
A.5.5 As discussed the response to FAQ 5.2, Managing Trustees need to ensure that the new arrangement is documented carefully. As prudent charity trustees, this should be documented by your solicitor. Please refer to the Panel Solicitors page on TMCP’s website for contact details.
This question has been considered by Sintons, one of the panel solicitors, along with TMCP and we confirm:
The new arrangement should be documented as soon as possible. This can be by “side letter”, as discussed in the response to FAQ 5.2, or, depending on the circumstances, by a deed of variation. This is a more formal legal document which varies the terms of the lease until the end of the lease term or a further variation.
A side letter is usually better for Managing Trustees as it is quicker, cheaper, and can be personal to the tenant. Unlike a deed of variation, it does not need to be registered at the Land Registry which means that it is therefore more confidential. The side letter should set out (1) all the new terms, (2) how long the arrangement is to last and importantly (3) that it ceases and the original lease terms prevail if the tenant becomes insolvent, breaches the new arrangement or otherwise substantially breaches the terms of the lease. If you have a guarantor under the lease, they should also be party to the side letter.
Please refer to the response to FAQ 5.2 for details of the charity law and Methodist law and policy requirements for side letters.
Q6. Leases – Termination due to COVID-19
Q6.1. We let out a garage which forms part of our premises as a car repair shop to a sole-trader. Our tenant has asked us to terminate the lease as he has been forced to close due to the latest Government announcements and has already had to lay off his employees. Can we simply agree to this; we have little choice. He simply cannot pay the rent? We are a small community and want to do what we can to help this family business.
A6.1 These are very difficult and unprecedented times and it is ultimately for the Managing Trustees to decide how they wish to proceed. There would be nothing preventing the Managing Trustees from agreeing to this if they felt it was in the best interests of the charity to do so and this was in accordance with the advice of their surveyor.
The Managing Trustees may however wish to consider the options discussed in the responses to FAQs 5.1 to 5.3 to see whether these would allow the tenant to continue with the lease. Depending upon how difficult your surveyor feels it may be to find a new tenant in the short term, does your surveyor advise that it would be in the better interests of the charity to consider arrangement such as a rent holiday (FAQ 5.2) or reduced rent (FAQ 5.3)? Alternatively, does your surveyor think agreeing a surrender is in the best interests of the charity?
It is also worth considering whether, given the raft of emergency Government help, it would be possible for your tenant to continue to honour their obligations under the lease. Where possible, the tenant should be encouraged to do all that they can. Can the tenant help the Managing Trustees? Please refer to the response to FAQ 5.2.
If the Managing Trustees did decide to proceed with a surrender, please bear in mind that there are charity law and Methodist law and policy requirements to be fulfilled. Please contact TMCP Legal if you wish to proceed so that we can clarify the requirements:
- Surveyor’s advice would be required confirming the value (if any) of the surrender and why it is in the best interests if the charity to agree to the same in these very exceptional circumstances.
- A deed of surrender would also need to be prepared by your solicitors including the usual template clauses and submitted to TMCP for approval.
- Please bear in mind that the deed would need to be sealed and signed by the Board of TMCP.
The firms on the Methodist panel of solicitors are familiar with the charity law and Methodist law and policy requirements for surrenders and it is recommended that you contact one of these firms to deal with this for you. Please refer to the Panel Solicitors page on TMCP’s website for contact details.
Q6.2. We let out our old Sunday school to a pre-school who continue to provide care for key workers. They have told us that they will continue to operate for the time being. One of the church stewards is concerned as we have been told to close the building and nobody else is using the premises anymore. She thinks it would be easier just to terminate the lease. Should we terminate the lease?
A6.2. In this case you have confirmed that the pre-school is a tenant under a lease rather than a mere licensee. They have legal rights under the lease and are likely to be protected from eviction once the Coronavirus Bill comes into force.
As the pre-school is a tenant and has exclusive rights to possession under the lease in any event, the Managing Trustees do not need to be concerned about the pre-school being the only occupier. The Managing Trustees do however need to bear in mind the legal rights that their tenant has under the lease and ensure that they do not do anything to remove rights that the tenant enjoys finding themselves in breach of the lease themselves.
A lease would usually include a provision requiring the tenant to comply with legislation. Responsibility for this would therefore lie with the tenant. The restrictions are ever changing and it is not always clear what is and what is not permitted in terms of leaving buildings open. While there are restrictions on places of worship, the Sunday school is now let out in the same way as other commercial premises and is subject to the terms of the lease. The Managing Trustees should keep in contact with their tenant (remotely e.g. by telephone or email) and remind them of the need to ensure that they continue to operate within the current regulations. If the Managing Trustees were notified by the local council for example that there was an issue with the pre-school remaining open, they would then need to take steps to try and address this.
In terms of the Managing Trustees’ involvement in the pre-school, perhaps offering pastoral support, this would need to be reviewed given the current crisis. Please refer to the guidance on the Methodist Church’s website (Coronavirus Guidance). The Managing Trustees may feel this is a good opportunity to explore ways to offer pastoral support remotely. If the Managing Trustees have previously attended meetings, it is likely that these will now be conducted via skype or a similar service in any event allowing the Managing Trustees to continue to be involved.
If the Managing Trustees previously offered services to their tenant e.g. cleaning, please refer to the response to FAQ 7.1.
Q7. Landlord obligations under a lease – services and communal space
Q7.1 We let out office space to a couple of small businesses. Under the lease there are communal areas and we have to perform a number of services including cleaning. We are usually happy to do this and enjoy the interaction with our tenants. However, can we continue to do this given the dangers posed by the coronavirus? Should we stop the tenants from using the communal areas including access to the offices?
A7.1. Managing Trustees should keep under review the guidance provided by the Government and the Connexional Team. Please refer to the FAQs available on the Methodist Church Website.
However, Managing Trustees also need to bear in mind the legal requirements under the lease and if they can no longer fulfil these obligations, that this is expressly agreed with the tenant.
In terms of the rights granted under the lease to use communal areas and access the offices, it is an important legal principle that if a landlord gives a right, such as a right of access, to their tenant with one hand, they cannot take it away with the other. In many cases the lease will be drafted in such a way as to allow the Managing Trustees as landlord to change the access routes so this could be a possibility if you need to change the access and can do so.
However, it is unlikely that the Managing Trustees would be able to completely close all access to the offices unless you were obliged to do so by law. The situation is ever changing and the Managing Trustees should keep the position under review. TMCP Legal will also keep the FAQs updated.
Often a lease would also allow the Managing Trustees as landlord to impose reasonable rules or regulations relating to use of the communal areas and access. It is recommended that the Managing Trustees speak to a solicitor to help them consider what proportionate measures should be introduced to keep the tenant (and the Managing Trustees) safe. It is likely that such rules would be deemed “reasonable”. Please refer to the Panel Solicitors page on TMCP’s website.
In relation to the services provided by the Managing Trustees, given the Government’s guidance on social distancing, can cleaning services for example continue to be provided at all due to the risks of cross contamination and infection to those carrying our the cleaning; whether Managing Trustees, employees or third party service providers? Are those who usually carry out the services “vulnerable” and/or are they “self-isolating”? Practically it may just not be possible to fulfil the services.
Again it will be necessary to look at the drafting of the lease and speak to your solicitors to see what services absolutely must be provided and what steps can be taken to ensure they can be provided safely:
- Are the Managing Trustees actually obliged to provide the services in these circumstances?
- Can an agreement be reached with the tenant in the short term?
- Is there scope to reduce the services or for these to be carried out by third parties at the tenant’s cost?
- Practically, would anybody else be able to deliver the services in accordance with current Government guidance?
It is recommended that the Managing Trustees obtain clarification from their solicitor of the services they have to provide and rights they have to accommodate, how these can be adapted in the circumstances and to speak to their tenant so that agreement can be reached.
Q8. Non-Residential Leases - Insurance
Q8.1 Our tenant wants us to either suspend the rent or terminate their lease due to the impact of COVID-19 on their business. Can we claim on our insurance?
A8.1 It is strongly recommended that the Managing Trustees check the position with their particular insurer. The situation is changing rapidly and companies are responding to the challenges posed by COVID-19 in different ways and adapt their stance in light of developments. You may want to keep checking the position.
TMCP is liaising with Methodist Insurance alongside the Connexional Team to establish what support is available for Managing Trustees and whether any further help can be provided.
You may also want to ask your tenant to check with their own insurer. Do they have business interruption insurance? If the tenant will be covered should they stay in the lease and continue to pay the rent until the current crisis subsides?
Please refer to FAQ 6 for guidance on how to approach the termination question.
If you have any queries in relation to these FAQs please feel free to call members of TMCP Legal and Finance using the telephone numbers which you will have at the foot of emails received from members of the team.