After last week’s news that several property landlords, including AEW UK REIT, had successfully sued some of its tenants for rent arrears that had amassed during the COVID pandemic, two of property’s big boys – Land Securities and British Land – have set up plans for a more amicable solution to the rent conundrum.
The two groups – with market caps of £5.3bn and £4.8bn respectively – have teamed up with the British Property Federation to propose a withdrawal of the government’s moratorium on enforcement action in favour of rents for the pandemic-affected period being ring-fenced and proper negotiations to take place.
It would allow any outstanding rent from March 2020 to June 2021, for retail, food and beverage, hospitality and leisure businesses, to be dealt with in isolation, with concessions and deferrals where appropriate. Where a building’s owner and tenants cannot reach a settlement, they would submit to binding arbitration.
The two companies said that by separating this period from future rental payments it would allow the market to return to normal as the economy reopens. The phased approach would “give businesses breathing space” and provide landlords with certainty to progress new investment.
The proposal makes a lot of sense but it is a bit of a Wild West out there with cowboy landlords and retailers taking wildly different standpoints on the issue. I do see a number of landlords wanting to take this up, however – after all it is in their explicit interest to help their tenants through this period and avoid any tenant failures and vacancies in their portfolio.
Following last week’s high court judgment it would be in the tenant’s interest to secure concessions on outstanding rents or risk being sued and having to cough up the lot.
Some, arguably, less reputable tenants that have gone down a different route, however. A handful of retailers have taken out the dreaded CVA and stipulated, among the usual store closures and rebasing of rent, that rent arrears during the pandemic be written off.
Landlords have filed a legal challenge to this and will be hoping for a similar outcome to that of last week.
This point from the proposal summed up the predicament perfectly: “Given the unprecedented nature of the pandemic, it is only right that the landlord, hospitality and retail sectors share the pain but in a way that reflects the relative strengths of their businesses and their ability to trade over the last year.”
Getting to this point, however, will be easier said than done in the land of the Wild West. It is going to take government intervention to set the parameters of sharing the costs of the pandemic and I fear a long time and a hefty legal bill before we reach an amicable solution.
QD view – Rent Wild West needs a solution