The problem is that landlords aren’t being paid their rent and they have no teeth, thanks to Government policy.
Whilst the pandemic has proved that many can work from home, very few businesses are anticipating that they will be completely vacating their offices and shops. Given this is the case it is extremely disappointing that landlords, the owners of these properties, were ignored in the Chancellor’s Summer Statement.
The Government’s Code of Practice for commercial property relationships is advisory and has no teeth. Remarks from the Government stating that where tenants can pay, they should pay is a great headline, but payment is completely unenforceable by landlords and the Chancellor has done nothing to help landlords get their rent.
Tenants need to be reminded, strongly, that rent unpaid in March and June, and rent due in September is still payable, and that where they can make payment that they should be doing so. To incentivise tenants in this position, landlords need to be given a fast-track process to enforce payment by these tenants of all outstanding rent and services charges from the end of the rent moratorium in October – with interest and any other financial penalties included in the lease for non-payment of rent.
Implementation of this policy will also reduce the applications to Court, hopefully avoiding a log jam, which could easily occur in October.
If enacted, landlords will then be able to focus on working collaboratively with tenants, including many in the retail sector, whose businesses are in real distress to produce solutions that work for each party in the long-term. They can then look beyond this relationship to working with other local landlords, tenants, the local authority and community groups to produce a successful High Street, which is likely to be far more than a retail destination, and will make a real contribution to the success of the UK economy over the next ten years.
The Remit Survey of rents collected in June reported that 10 days after the June rent was payable an average of 38% rent, and 33% of all service charges remained unpaid. The sample was across all property classes, but what stands out is that within the office class 47% of rents were unpaid.
Statistics on rent collection published by listed landlords show that only those who own logistics units are collecting over 90% of their rents. Hammerson announced on 1 July that they had collected just 16% of the rents due in June from their retail-focused property portfolio, whilst Landsec reported they had collected 60% of June rents across their more diverse portfolio.
Owners of commercial properties are being treated as a bottomless money pit by the Government, required to significantly improve the carbon efficiency of their buildings, to contribute to the regeneration of our High Streets, and to support businesses who signed leases that they can honour – but choose not to.
A tide of winding up petitions to force payment of rent – or even for the winding up of landlords who have run out of cash – is not going to help the UK economy get back on its feet.