quarter days property management guidecovid19 content blue property management guideWhen dealing with leases for commercial properties in England and the UK, you often see rent being paid quarterly in advance - a big change to say a monthly payment basis.

Not only can this be confusing in the way that you calculate or apportion these monies, but you can also be dealing with much larger sums of rent or other say service charge monies due for the next three months.  

So for example, the total money due in a year may be easily understood – for example, £12,000 each year. But then the lease may go onto how, or more importantly when, this is paid - often on ‘quarter days’.

checklist small property management guide CLICK HERE to immediately download a Fact Sheet document answering the 5 key questions about the rent quarter day basis for commercial property leases.

We have a quick video here outlining the 5 key questions to do with these form of payments within a commercial property lease:

The Quarter Day Principle

This basically states that the money is paid in chunks of 3 months, and not the more popular means of monthly or even weekly in other, say, residential leases.

So, in the above example means paying £3,000 four times a year, which then totals £12,000 for the whole year.

Now, this is a large amount of money, rather than, for example, only £1,000 every month - and to make matters worse this is often in advance and not in arrears. Big potential problems for tenants who need to fork the bill, but great news for the landlord receiving this.

And it’s the landlords that these really benefit, as they’re getting more money up-front and therefore offers good security. It may not sound fair, but as this is the norm for commercial property leases, then deviating back to an ‘easier’ method later for a tenant is a real plus point.

This can cause real cash flow issues if this isn’t understood from day one. Okay, the actual amounts will end up being the same, but any business owner will know how important it is to only need to pay £1000 at a time rather than £3000, particularly when this is for future liabilities that you have not earned any income back from yet.

Check What’s Included

Whilst this is usual for the main rent, also watch out for other charges being on the same basis, for example, service charge and any initial recharge.

Or even worse, the insurance premium on an annual-in-advance basis.

(Oh yes, and completely separate concerning a tenant’s other outgoings, any business rates are generated on an annual basis as well, however dialogue with the local billing authority will often allow monthly payments). 

When These Are

When looking at when these are, the majority are on set dates prescribed in the year, often referred to as standard normal or legal ‘quarter days’. Or from another perspective, ‘quarterly in advance’ payment of due monies.

Sometimes these can be stated as different dates, but usually are meant as the traditional UK and England rent quarter days of 25th December, 25 March, 24 June, and 29 September. These may seem a little random, but that’s the way that it has evolved over time.

On a practical note, one way that you can remember these English rent quarter days is to first remember the first one as Christmas day, and then the day in each of the other months being the same as the number of letters in that month in addition to 20. Therefore:

· Christmas day is the first one – 25 December
· March has 5 letters, so 20 + 5 is – 25 March
· June has 4 letters, so 20 + 4 is – 24 June
· September has 9 letters, so 20 + 9 is – 29 September

The ‘Modern’ Quarter Days

In an effort to try and get with the times, you can see reference to ‘modern’ or 'new English' quarter days which take the 1st of the proceeding month of each standard quarter days in order to try and round things up nicely, therefore:

· 1st January for just after the December quarter day (Christmas day)
· 1st April for just after the March quarter day
· 1st July for just after the June quarter day
· 1st October just after the September quarter day

Apportionments Getting Awkward

Whichever quarterly method you’re using, the actual amount within each quarter is assumed to be the same even though the dates are slightly different each month (particularly with traditional quarter days).

So, the literal number of days between, say, the 24th June and the 28th September is more than the 25th March to the 23rd June. But the quarter chunks of money are the same each time.

However, watch out for the beginning and ends of these periods either at the start or end of the lease, or any mid-term changes like break clauses (plus, whether you should be even charging rent for a contracted-out lease).

These often do use a day-apportionment basis to split a quarterly charge up which can be different for different times of the year.

Alternative Ways Around

Taking a step back, it’s worth seeing what other options are available from either a landlord’s or tenant’s perspective to try and make things a little easier.

One option is to simply agree a monthly rather than the usual quarter-day basis anyway, ideally the 1st of each month in advance. Okay, it may not be the norm, but for a struggling tenant in say post-Covid-19 times then something is better than nothing.

On a similar line a landlord may agree to receive monthly payments, but keep the charges as quarterly in the lease.

This can get a little confusing, and ideally needs a clear side letter to document this, but at least on a practical note money can be broken down into bite-size monthly chunks even though on record it’s still due every quarter (and a landlord ideally having a right to resort back to this basis).

Also, watch out for the actual total rent figure changing and therefore the quarterly amounts, for example with rent review adjustments, ITZA calculations for retail properties, and new rents from asset management techniques.

A final point is to be clear on how these payments should be made no matter what the dates are, right from interest charges, to recovery-action if they are late or not paid such as with CRAR, and even down to stating in the lease how they should be paid, for example by regular standing order.

Getting the Money Right

Therefore, as you begin to get your head around the principle of quarter days in a commercial property lease, begin by first understanding the principles at hand.

Although it’s very beneficial for a landlord to have so much money being paid in advance every 3 months, it is the norm for usual commercial leases.

Therefore, make sure the cash-flow issues and timing is fully accounted for, or else you could come up with a cropper.

However, don’t forget that there can be ways to get around this, which can also benefit a landlord as well. The most important time is when a lease is being first granted and there is an opportunity to state another basis of payment, but even afterwards there are still opportunities for change.

checklist small property management guide CLICK HERE to immediately download a Fact Sheet document answering the 5 key questions about the rent quarter day basis for commercial property leases.

Frequently Asked Questions

Here are some quick-fire FAQs on the subject, a lot of which is covered above, but still a helpful summary of the keys questions often asked on the subject:

1. What are the rent quarter payment dates for 2020? - the 25th March 2020, 24th June 2020, 29th September 2020, and 25th December 2020

2. Is there a quarter rent day calculator available? - yes you can check these online, but remember that the actual dates and rent for each period are set, it's usually the rent apportionment of the first or last quarters based upon a daily basis that these calculators work out.

3. What is rent paid quarterly in advance? - this is the usual basis in commercial property leases with two aspects. Firstly, on 4 set dates in a year (every quarter), and secondly to be paid at the beginning of each period (in advance), not at the end (arrears).

4. Is commercial rent paid in advance or arrears? - it is usually in advance, but the lease must clearly state this in order to be effective. 

5. What are the standard rent quarter dates? - also referred to as the traditional, normal, or legal quarter dates - these are the 25th March, 24th June, 29th September, and 25th December

6. How many days are there in a quarter? - the number of days in a quarter is all different. i.e. 90 days for the December quarter (25th December to 24th March, and 91 on a leap year), 91 for the March quarter (25th March to 23rd June), 97 for the June quarter (24th June to 28th September), and 87 for the September quarter (29th September to 24th December).

7. How many quarter days are there in a year? - 4 in total, whether modern or traditional ones

8. What are quarterly rent invoice dates? - the quarter dates are as above which cover the period of rent being paid, however, the date of the invoice being issued can be different, often before the due date at the beginning of the quarter. 

9. What does every quarter mean? - this refers to 4 set payment dates approximately every 3 months, or standard actual dates.

10. How many months are there in a quarter? - on average there are 3 months, however, with traditional ones they are apportioned across 4 calendar months.

11. How do you calculate the rent per day? - you have to check how the lease states this, but usually, you take the annual rent and divide by 365 days (or 366 in a leap year) to work out an average daily rate actually ignoring the quarter periods. 

12. What does billed quarterly mean? - billing simply means charges or invoice which has two elements to this. Firstly, covering a set period of around 3 months, but secondly, the bill or invoice for paying this is often at the beginning of the period (in advance) or afterwards (in arrears).

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