Business tenancies have come under the spotlight more than ever during this COVID-19 epidemic and the landlord and tenant relationship has been put under unprecedented strain.

Tenants have struggled to maintain their businesses in tact, especially those forced to close for an extended period, and unfortunately some won’t make it, so rent payments have become something of a real challenge for almost all businesses.

Many landlords too have been struggling to keep their heads above water, as they too have obligations to meet. Many quoted property companies use leverage to enhance their returns for their investors, but that means their lending covenants are always at risks of being breached if they cannot maintain a reasonably healthy cash-flow. It’s vital they keeping rents coming in.

In this situation it’s in both landlords’ and tenant’s interests to agree a compromise in some cases; for the tenants to pay all they possibly can, and for landlords to accept that their payments may not come in on time. But longer term, for these tenants, there is still an obligation to make up arrears, once trading returns to normal.

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Where landlords are in a strong enough financial position, some of these arrears my eventually be waived, but that’s entirely up to them, there is still a legal obligation on tenants to pay in full.

Quoted property companies are anxious to assure their investors that they are coping in the current crisis by showing that the bulk of their rents are being collected and they remain financially viable.

In this vein one company, Alternative Income REIT, a real estate investment trust traded on the Main Market of the London Stock Exchange – with a current market capitalisation of around £40m and net asset value of around £71m – put our a statement yesterday that it expects to collect at least 84% of Q3 rent by September.

The company says in its Regulatory News Service (RNS) release that 89% of its quarterly rents, which represented 70.4% of the annual rent roll, had been collected. This it says included the quarter rent from Meridian Steel, whose rent free period ended on 23 June 2020.

The company which has a broadly based portfolio of 19 large property holdings across retail, leisure, industrial, residential, medical and student accommodation says the proportion of rents that are contractually now due monthly is now 17.4%.

A small number of tenants, representing just 12.2% of the annual rent roll, had been granted concessions for a limited period to settle their rent monthly, of which 72% had settled their July rents.

A company spokesperson had said:

“The company remains in discussion with a small number of tenants, representing 11% of the rent roll, in respect of potential deferral of their rent payments in support of their near term cash flow requirements.”

“The group remains well capitalised and we entered this period of uncertainty in a robust position supported by our low recurring annual overhead.”

Robust rent collection continuing with at least 84% of Q3 rents expected to be collected by September 2020

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