24 June is traditionally another quarterly payment day for the majority of retailers and commercial tenants. But with many retailers, pubs, restaurants and other operators either still being unable to trade or only trading with significantly reduced or limited trade, will they be in a position to pay?
Most commercial leases provide for the payment of rent in advance by four equal instalments on the usual quarter days (i.e. 25 March, 24 June, 29 September and 25 December). It has been widely reported that many tenants did not fully pay their rents for the last payment due in March, and similar is expected today.
The government has already announced that the moratorium on forfeiture for commercial tenants has been extended until 30 September 2020. This was coupled by the amendments to require the minimum of an equivalent of 189 days’ rent arrears before the commercial rent arrears recovery may take place. These measures serve to protect those tenants who are unable to make their rental payments.
But what next? Landlords and tenants cannot continue with the uncertainty and some landlords are reporting further problems if they continue to be unable to collect rents and meet their own liabilities. There is much speculation on the potential fate of one of the biggest retail landlords, Intu , which could have a significant impact on shopping centres across the country.
The voluntary code of practice is clearly pushing for collaboration and agreement rather than strict enforcement.
In fact, many landlords and tenants have already been involved in negotiations regarding how best to deal with the payments of the rents since March and going forward. But, as always, there is great variance on what is being agreed.
Landlords are increasingly willing to accept monthly payments from tenants, which helps greatly with their cashflow. There is even talk of paying rents in arrears rather than in advance. There have also been others willing to offer rent free periods, rent holidays and deferments. Whilst some landlords are maintaining a hard stance that the rents are due and are therefore seeking more inventive ways to force tenants to make payments. We have even seen the return of turnover rents for retailers being both suggested and agreed as a way forward.
It is clearly in everyone’s interests to agree a way forward that is viable for all concerned and unfortunately there are no easy options. Dare I say it, but during these unprecedented times all parties have to be seen to be “doing their bit” and “sharing the pain” in the same way as we all have during the lockdown.
Commercial property has always been fast paced; now more so than ever. The March quarter date, when these issues were first raised, seems only days ago and I am sure that the September quarter will be with us before we know it.
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