There could be a potential banking crisis as landlords will have no income for nine months and banks could have a serious funding issue.
Today (29 September) is the quarter day on which landlords will be sending out rent demands for the next quarter for October – December to tenants in offices, shops, restaurants and other commercial properties.
It is estimated that as many as 25% of office occupiers, and 40% of restaurants and shops will ignore these demands. Landlords can do nothing to enforce payment due to the Government’s ‘eviction ban’ that was introduced in March 2020 and now extends to the end of the year.
Most landlords finance the acquisition of and improvements to their properties by bank loans. This includes covenants relating to the value of the property and the ratio of the rental income to the interest.
When signing these loan agreements no one anticipated that the Government would legalise squatting in these properties by removing all rights of the Landlord to enforce payment of rent due.
The December 2020 financial statements of the Banks will make sad reading, with provisions for non-recoverable loans advanced to businesses such as retailers and restaurant chains, as well as landlords who have been forced by the Government into a position where they have no income for nine months. The new banking names who have appeared in the last ten years – our ‘challenger banks’ – may have serious funding issues to address as a result. Does the Government have plans to address this potential banking crisis?
The other key sector that is suffering is our pensions industry. Many large pension funds invest in commercial property, either through shares in listed property groups such as British Land and Land Securities, or through direct ownership. The rents collected fund a significant proportion of pensions paid.
Has the Government considered the impact of a notice to pensioners in 2021 that pensions cannot be paid due to the non-payment of rent by tenants over the last nine months?