• Most UK loans facility documents assume that there is a three-month rent paid in advance on the usual quarter dates. If L, as borrower, accepts monthly rent payments then will that leave L with sufficient cash to meet its debt payment obligations?
• Financial covenants should be checked to ensure that monthly rents will not result in an inadvertent breach.
• Is the managing agent only obliged to collect the rents (and forward them to L) on a quarterly basis? If so, any changes may have to be agreed with the agent.
• If there are former Ts or guarantors, care needs to be taken to ensure that they are not released from liability. Do not forget that if there are any rent arrears then s17 notices must be served in time.
• If there is a guarantor, check that the agreement allows L to compromise T’s rent payment obligations. The critical point here is not to allow any agreement between L and T to constitute a variation of the lease. If it is a variation then the guarantor will be released from all liability. The answer, of course, is to get the guarantor to agree to the change (and that it is not a variation); in any event, it is also wise to ensure that the arrangements are made at L’s discretion only, and can therefore be terminated at L’s discretion.
• Consider whether these changes will have any impact on future rent reviews (and also on conditions in relation to T’s break clause).

Source: Herbert Smith .© Practical Lawyer