AEW UK REIT (AEWU) has successfully taken out legal action against two well-funded national tenants – Sports Direct and Mecca Bingo – to recover rent that it had refused to pay during the pandemic.
The result of the legal proceedings is a huge moment for the property sector, which has been dogged by unpaid rent. The dispute is not with all tenants that haven’t paid (most tenants, especially smaller and independent businesses in the retail and hospitality sectors, have been given dispensation by landlords), but with a handful of well-resourced national and international businesses that can pay but are taking advantage of the rent holiday in place in the UK (which is currently due to end at the end of June 2021).
The court ordered that rent due for the periods claimed, totalling £602,489, must now be paid. In addition, the company said it would write to the tenants to claim the outstanding rent arrears that have fallen due for payment since the claims were issued and added it was confident of further recovery given the outcome of its successful application to the court.
It is also the company’s intention to seek to recover its legal fees incurred in the litigation from the tenants.
The combined total of the amount already claimed and the outstanding rent arrears that have fallen due for payment since the claims commenced is £1,200,566, including VAT. Of this amount, £924,530 relates to the period up to 31 March 2021, 56% (£520,919) of which has been provided for as at that date.
The expected receipt of the outstanding amounts that have previously been provided for will contribute to the company’s EPRA earnings per share (EPS).
[QD comment: This feels like a landmark moment for the property sector. It will surely set a precedent that will give confidence to other landlords to pursue those tenants that have refused to engage in discussions on rent arrears. It is important to note that not all unpaid rent will be collected. It will be the rent from well-funded tenants that have chosen not to pay. The majority of unpaid rent is from tenants that have been badly affected during the pandemic, and this will take a long time to recoup – if indeed it ever is. Nevertheless, the news is a huge relief for landlords.]
AEWU : AEW UK REIT wins legal battle over unpaid rent