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13th May 2022

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UK faces ‘blood on the carpet’ over £6bn rent arrears

The UK government is under pressure to resolve a £6bn rent arrears crisis and prevent a deluge of legal disputes between commercial tenants and landlords, ahead of the end of a temporary ban on evictions next month.

“If the government doesn’t do anything you will have blood on the carpet. All you need is one landlord to trigger the payment requirement in full and the whole company could fall,” said Kate Nicholls, head of UKHospitality, the trade body.

The ban has prevented evictions since it was introduced last March 2020 but ends on June 30. 

In a letter sent to housing secretary Robert Jenrick on Friday that has been seen by the Financial Times, UKHospitality argued that “there is a moral obligation on landlords . . . to make rent concessions to businesses forced to close”.

It suggests the government should extend the eviction moratorium until December to allow businesses to recover after lockdown ends, and develop an adjudication process on sharing losses between tenants and landlords with at least 50 per cent of rent debt written off.

Hospitality and retail are among the sectors worst affected by the pandemic, having been shut down for long periods. 

UKHospitality estimates that £2bn in rent is owed by hospitality businesses with 40 per cent of premises still negotiating over current unpaid rent with landlords. A further 20 to 30 per cent are still in discussions on how to settle debts from last year’s lockdowns, it said.

Ministers have asked tenants and landlords for their views on six potential ways forward, with submissions due by Tuesday. These range from simply ending the eviction ban to a binding adjudication process for landlords and tenants. 

A group of landlords, led by British Land, Land Securities and trade body the British Property Federation, put forward their own proposal on Thursday. They argue that businesses should pay rent from the end of June, by which time trading will have resumed under the government reopening plans. 

They also propose that unpaid rent built up since March 2020 would be ringfenced and tenants protected until the end of 2021, giving time for them to reach agreements about how much will be written off, deferred or paid.

If a settlement cannot be reached, the landlords propose a binding arbitration process. “Ultimately you need something to bring people to the table,” said Mark Allan, Landsec chief executive. 

Hospitality businesses argue their recovery could be crippled by having to pay rent so soon after they have been permitted to reopen fully on June 21, combined with the business rates holiday that also finishes at the end of June.

Peter Thornton, chief financial officer of Piano Works, which runs two bars in London, said they had rent arrears of £687,000 and had not reached agreement with either of their two landlords on when or how the money should be paid. “We have a huge financial risk once we get back and trading . . . we are at the mercy of the landlord,” he said.

David Abramson, chief executive of commercial property consultancy Cedar Dean, said the problem was particularly acute for smaller businesses that did not have the resources to employ advisers to negotiate with landlords. 

Several large companies including New Look and The Restaurant Group have been through administration processes that forced landlords to cut rents. But in the past fortnight, two High Court judgments ruled that tenants including Sports Direct, Mecca Bingo and Cineworld will have to pay arrears. 

2021-05-01 10:00:37

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By admin