High street chains have been given breathing space from hostile landlords threatening to force them into administration after the government temporarily banned winding-up orders and aggressive rent collection tactics during the coronavirus pandemic.
Many of the UK’s retailers and restaurateurs have been forced to shut following the introduction of Britain’s lockdown last month, sparking fierce arguments with landlords over whether they can afford to pay their rents.
Some landlords have sought to use aggressive tactics to strong-arm tenants into paying, including the use of statutory demands, a type of written warning, and winding-up petitions, court orders that force a company into compulsory liquidation.
Vietnamese noodle chain Pho and Caffè Concerto are among those that have been threatened with action from landlords.
The government said on Thursday that it would introduce temporary measures to safeguard the UK high street against aggressive debt recovery.
Statutory demands and winding-up petitions for commercial tenants hit by coronavirus will be voided, and the use of commercial rent arrears recovery (CRAR) will not be allowed unless landlords are owed 90 days of unpaid rent. CRAR allows landlords to take control of a tenant’s goods unless they pay their rents.
“Rents are a huge burden for retailers that must be paid even where shops are closed,” said Helen Dickinson, chief executive of the British Retail Consortium, who added that the measures “will give retailers some vital relief and help safeguard millions of jobs all across the country”.
The measures will be included in the Corporate Insolvency and Governance Bill set out by Alok Sharma, business secretary, earlier this month. The government has already introduced a moratorium of eviction for non-payment of rents for three months.
The government has also called for landlords and tenants to work together, with growing concerns also about how the non-payment of rents will hit the British property sector.
Landlords, including listed companies and pension funds, have said that their own income has fallen by as much as two-thirds, with fears that this will start to cause failures among property owners.
Only 41 per cent of retailers paid rent on the latest collection day of March 25, according to data compiled by Remit Consulting, covering more than 25,000 leases.
Financial regulators have urged investors and lenders to take coronavirus issues into account when landlords face potential breaches of debt covenants.
Kate Nicholls, chief executive of UK Hospitality, said: “Many businesses in our sector have no revenue whatsoever coming in, so paying rents has been out of the question for some.”
Landlords reacted angrily to the move. Guy Butler, co-founder of Glenbrook, said: “Nobody now has any incentive to pay their rent.”
Coronavirus business update
How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter.
He used CRAR this month to force Poundstretcher, which is still trading, to pay monthly rent on a unit in Manchester. “The banks will come under pressure because property companies won’t have the money to pay back loans,” he added.
He has collected 92 per cent of rent due so far but said that could now drop. “Most landlords are fair and can agree to deferments or reductions.”
Andrew Sell, head of asset management at Criterion Capital, the West End landlord and owner of the Trocadero centre, has issued statutory demands on a number of tenants who opted not to pay on March 25.
“It’s easy to paint landlords as the bad guys, but many landlords use income to pay pension funds,” he said.
“[This decision] gives us no leverage at all. If a tenant folds their arms and says ‘we won’t pay’ what can we do? Meanwhile, we have to pay our lenders, maintain our buildings.”