Retail landlords & those managing hospitality spaces within the UK are threatening their tenants with legal action after many withheld rental payments to save money during the coronavirus lockdown. Caffe Concerto, Escape Hunt and Pho, the chain of Vietnamese noodle restaurants, are amongst those who have been warned to expect further action.
A director at Caffe Concerto, Stefano Borjak, explains that retailers are experiencing serious issues as landlords attempt to wind up companies such as his, which achieves a turnover of £40 million each year. He goes on to state that the cash flow which the company currently possesses must be used to pay their staff. The restaurant chain operates in 37 locations across the UK but faces a petition to wind up its business because of a court order from the owner of its site in Haymarket, Criterion Capital, which could force an insolvent business into compulsory liquidation. This is because the company did not pay its rent bill of £100,000.
According to letters, both Escape Hunt and Pho have also been issued warnings of legal action if their rent is not paid in full for the next three months to the owner of their sites in Reading, Sykes Capital. The letter stated that although the landowner appreciates that retailers will be experiencing difficult times, payment of rent must take priority over other expenses. Criteron Capital’s head of asset management, Andrew Sell, stated that the government has currently given no indication that hospitality, retail or commercial tenants can receive a holiday from rental payments. However, many tenants are deciding to withhold their rental payments. He goes on to explain that such action will jeopardise landowner’s obligations to meet their commitments to lenders.
According to statistics, some landlords across the UK received less than one-third of expected rent payments earlier this month after the government’s announcement that it was granting tenants a three-month break from evictions for non-payment of rent.
Martin Edwards, a partner for property disputes at Shakespeare Martineau, the law firm, stated that with so much noise focused around withheld payments, all commercial and business tenants, such as retailers, should understand that this emergency legislation announced by the government earlier this month does not allow them to avoid paying rent entirely.
Shopping centre landlord Intu announced that it received only 29 per cent of its expected rent payments this month, even after cutting service charges and offering deferrals. Matthew Roberts, chief executive at Intu, explains that rent remains payable and is legally enforceable.
British Land’s chief executive, Chris Griggs, has added that the firm was allowing their smaller tenants a break from paying rent; however, he added that they do have their own costs to manage. He also stated that when analysing the current state of shopping centres, very few stores remain open yet each centre must remain open and running. Technology innovations, such as property management software for free, can help both residential and commercial landlords manage their tenants efficiently.
However, fashion business owner Natalie Williams, who rents a site owned by the City of London Corporation, states that rent deferrals do not go far enough. Although the company provided its tenants with a deferral from paying rent for three months, she explains that revenues for tenants will not be delayed: they will in fact be lost.
The City of London Corporation has refused to grant requests from businesses for rent holidays or reductions, which Ms Williams claims is pushing business owners to potentially dissolve their businesses as they are left with no choice. Many other businesses are facing this issue in this uncertain time.
In response, the City of London Corporation emphasised that they are committed to offering their tenants support and will review these measures over the forthcoming weeks and months to ensure that they align with the government’s support package for businesses.