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The UK government is under pressure to resolve a £ 6bn rent delay crisis and prevent a deluge of legal disputes between commercial tenants and landlords, before the end of a temporary ban on evictions next month.
“If the government does nothing, you will have blood on the carpet. All you need is a homeowner to activate the full payment requirement and the whole company could fall, ”said Kate Nicholls, head of UKHospitality, the business body.
The ban has prevented evictions since it was introduced in March 2020, but ends on June 30.
In a letter sent on Friday to Housing Secretary Robert Jenrick, which has been seen by the Financial Times, UKHospitality argued that “there is a moral obligation for homeowners. . . make rental concessions to companies forced to close ”.
He suggests that the government extend the eviction moratorium until December to allow companies to recover after the closure ends and develop an adjudication process on the distribution of losses between tenants and landlords with at least 50% of the rental debt canceled.
Hospitality and retail trade are among the most affected sectors by the pandemic, stopped for long periods.
UKHospitality estimates that hospitality companies owe £ 2bn in rent, with 40% of premises still negotiating over current unpaid rents with landlords. Another 20-30% are still in discussions on how to settle debts from last year’s closures, he said.
Ministers have asked their tenants and landlords for their views on six possible paths to follow, and presentations are due before Tuesday. These range from simply ending the eviction ban to a binding award process for landlords and tenants.
A group of homeowners, led by British Land, Soil values and the British Property Federation trade, presented their own proposal on Thursday. They argue that companies should pay the rent by the end of June, the date on which trade will have resumed according to government reopening plans.
They also propose that unpaid rents accrued since March 2020 be closed and protect tenants until the end of 2021, which will allow them to reach agreements on how much will be canceled, postponed or paid.
If no agreement can be reached, the owners propose a binding arbitration process. “Ultimately, you need something to bring people to the table,” said Mark Allan, Landsec’s chief executive.
Hotel companies argue that their recovery could be stalled by having to pay rent so soon after they have been allowed to reopen fully on June 21, combined with commercial rates that will also end at the end of June.
Peter Thornton, chief financial officer of Piano Works, which runs two bars in London, said they had rented arrears of £ 687,000 and had not reached an agreement with either owner on when or how they should be paid. the money. “We have a great financial risk once we operate again. . . we are at the mercy of the owner, ”he said.
David Abramson, executive director of commercial property consultancy Cedar Dean, said the problem was particularly acute for smaller businesses that did not have the resources to hire consultants to negotiate with homeowners.
Several large companies, including New Look and The Restaurant Group, have gone through administrative processes that forced landlords to reduce rents. But in the last fortnight, two Supreme Court rulings have ruled that tenants, including Sports Direct, Mecca Bingo and Cineworld, will have to pay arrears.
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