This is no joke – some already struggling retailers are withholding rent payments to preserve their cash-flows during the lock-down, that’s according to a recent report by the Financial Times.
Consequently, their landlords are threatening legal action against some retail and hospitality operators. Letters seen by the FT, show that Vietnamese noodle chain Pho, Escape Hunt and Caffè Concerto are among those to have been threatened with court action for breach of contract by withholding rent due on the quarter day of 25th March.
Landlord Sykes Capital owner of sites in reading and Criterion Capital, owner of sites in Haymarket are both threatening action.
Criterion Capital claims it is owed £100,000 in rent from Caffè Concerto, operator of 37 sites in the UK but now facing a winding-up petition, a court order that could force the company if insolvent into compulsory liquidation.
Stefano Borjak, director of Caffè Concerto told the FT, “We are facing a serious problem here. They are trying to wind up the company, which does £40m turnover per year. The cash flow we have at the moment we need to pay staff.”
Criterion Capital’s letter explains, “We appreciate these are difficult times, however, payment of rent should be one of the highest priority business expenses.”
Andrew Sell, head of asset management at Criterion Capital told the FT:
“The government at no time has said that commercial tenants should receive a rental holiday, yet many, but not all, are choosing to withhold rent. Such action is jeopardising our obligation to meet our commitments to lenders.”
Some commercial landlords are said to be receiving less than one-third of their rent due after the government with last week’s emergency bill granted tenants a three-month moratorium against eviction for non-payment.
Martin Edwards, property disputes partner at Shakespeare Martineau told the FT:
“Among all of the noise around withheld payments, all business tenants – including retailers – must understand that the emergency legislation rushed through by the government this week does not mean they can avoid paying any rent at all,”
Intu, the beleaguered shopping centre owners of including the Manchester Trafford Centre and the Lakeside complex in Essex – which reported a £2bn loss in 2019 last year – has said it has received just 29 per cent of expected rent for the second quarter, even after offering to defer and cut back on service charges.
Intu chief executive Matthew Roberts has said: “That rent is payable, that’s legally enforceable,”
Meanwhile, Chris Griggs, chief executive of British Land, told the FT they would be allowing its smaller tenants a rent–free period, but that it still had its own costs to pay. “Look at a very large shopping centre with very few shops open, you have to keep all of it running,” he said.
On the other hand struggling tenants are protesting and say that rent-deferrals will are not enough to save them.
Landlords, The City of London Corporation, that Natalie Williams owner of a fashion retail business leases a site from, has been offered a three-month rent deferral. She told the FT:
“Rental payments may be delayed, but our revenues will be lost, not delayed, The City of London Corporation’s refusal to grant requests for rent reductions or holidays is leaving business owners with no other choice than to consider dissolving the businesses they have spent years building”
A spokesperson for The City of London Corporation’s had said:
“We are committed to providing well-targeted support to our tenants in these difficult times and will continue to review the measures in place over the coming weeks and months, in line with the government’s package of support for businesses.”