Thousands of landlords with commercial properties will be watching their bank accounts nervously today as they wait to see if tenants are able or willing to pay their quarterly rent in advance.

Dubbed watershed Wednesday and largely predicted to be a disaster for many landlords who have tenants operating in vulnerable areas of the economy worst impacted by the lockdown, today is June quarter day.

The consensus among landlords and managing agents is that the payments won’t be arriving, and that many tenants will have already negotiated deals to get around this latest Coronavirus rent cliff face or will be making the brutal choice to prioritise staff pay over rent.

The government has also made this easier – tenants are in effect protected from eviction at the moment by measures introduced at the end of March.

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“At present, landlords cannot exercise their rights to re-enter premises or forfeit leases if their tenants have not paid rent. This ban on evictions was due to end on 30 June 2020 under the provisions of the Coronavirus Act 2020,” says Katie Hickman of legal firm VWV.

“But the Government intends to exercise its powers to extend this period and has accordingly announced that no business tenant will be forced out of their premises for non-payment of rent until 30 September 2020 at the earliest. The Government has the power to extend this period further if necessary.”

£2.5 billion

Every quarter £2.5 billion is collected from high street tenants alone, according to the British Property Federation, but one shopping centre owner recently revealed that it had only collected 56% during the last quarter day, and was nervous about what will happen this time around.

“I don’t believe that tenants will be paying up in a timely fashion today,” Adam Diamant of London firm Land Commercial Surveyors tells LandlordZONE.

“I think that today and going forward will result in more tenants struggling and asking for help, especially those involved in beauty and nail salons who are yet to be allowed to open. There will be lots more conversations between landlords and tenants in the coming days and weeks.”

Property industry commentator Russel Quirk agrees, saying that times have changed dramatically – “normally June quarter day is a highlight of the calendar for retail and office owners”.

“But today, I suspect, far from it. Hundreds of thousands won’t pay. But only some of them can’t pay.”

As Russell alludes to, the biggest question today for landlords is whether tenants will take matters into their own hands and withhold rent as they scramble to protect what cash flow they do have to pay other bills – for example many forget the furlough system is not a cost-free scheme for employers.

Late last month the government announced that it had set up a working group to establish a ‘fair and transparent’ code to help landlords and agents ‘spread the financial burdens created by the crisis across the sector’. But this will come too late for today’s deadline.

Read Tom Entwistle’s opinion piece on rent collection.

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4 COMMENTS

  1. This is all a terrible tragedy and were all hurting, landlords and tenants. Unfortunately a lot of people are going to lose businesses through this. Small businesses are gonna hurt the worst. Hopefully some people that are renting commercial property for a business have taken advantage of the new business loans available and using that to pay landlords as well as business expenses.

  2. I cannot accept that any business should be required to take on a loan to pay rent or any other commercial bill. especially when future income is uncertain.
    The grant system should have treated all businesses in the same way.
    Unfortunately by paying grants in at the bottom of the food chain with no control over how the money is utilised the government has failed to ensure that it flows upwards through every tier..
    They should have simply frozen all commercial debts across all sectors at all levels.

    • That just encourages suppliers not to provide goods, know way could i supply services worth many thousands and not receive payment. Plus why should i act as a bank of last resort to tenants that can’t pay are unlikely ever to be in a position to repay and in all probability will just go bump and start again , most small business have little incentive as they don’t own many assets anyway, few have large cash reserves Landlords on the other hand have a large asset so cannot just phoenix debts away.

  3. Watching the next PM Rishi Sunak using all his Goldman Sachs’ analytical skills to devise a plan that does it best to pull as many into the lifeboat makes the government seem human. As a commercial and residential landlord, my commercial tenant of 25 years cannot pay as his restaurant/club has not earnt a bean since lock down. When he opens again, he will benefit from the rest of the year’s business rates which may be equivalent to 8 months at £4k. On the flip side, I have been a tenant of the City of London Corporation for 40 years. Unfortunately, last year with no sign of Covid on the horizon, the CoL agreed a sub lease with a major developer which puts the developer in this JV in the driving seat on a major redevelopment site in Southwark. Putting .a feather as a landlord and another as a tenant into each side of a set of scales, it tilts in favour of the tenant. Covid is a”force majeure” which no government is prepared to acknowledge. No tenancy agreement can be fulfilled by the tenant. It is suspended until the government allows the tenant to operate properly. All wealth in a country should revert back to that country/state. In Hobbes’ Leviathan “I authorise and give up my right of governing myself to this man (Rishi or Bojo), or to this assembly of men, on this condition; that thou give up, thy right to him, and authorise all his actions in like manner.” Nobody asked to be locked down in this present crisis and that is why governments should ultimately bear the brunt. We have yet to have the post mortem where the UK government will be held accountable.

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