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When Debenhams filed for administration last week, it wasn’t just suppliers of its stock, who are owed cash, that felt the pain. There are 22,000 jobs at risk if the retailer cannot be rescued and many of its 142 stores are unlikely to reopen, spelling more trouble for British high streets. And there is also a network of landlords who rely on quarterly rent payments from their shops.

The outlook for these landlords was dark enough before the pandemic brought the British economy to its knees. More than 16,000 stores closed last year and the enforced shutdown of cafes, pubs, restaurants and non-essential shops is expected to result in thousands more pulling down the shutters for good.

Since pre-industrial times, landlords and tenants have adhered to a schedule of quarterly rent payments, when annual commercial or agricultural rents were payable in four equal instalments on the “quarter days”, linked to religious festivals.

The most recent payday, the second-quarter payment date of 25 March, was a far from harmonious occasion, however. Hammerson, owner of malls such as Birmingham’s Bullring and Brent Cross in London, said it had only received 37% of the rent due for the second quarter. Its competitor Intu Properties, which owns the Trafford Centre in Manchester, received just 29% of second-quarter rents on the due date. London & Associated Properties, which owns the Orchard Square shopping centre in Sheffield, said it had collected about 50% of rent due.

It is not just Debenhams, New Look and Sir Philip Green’s Arcadia group – to name just a few of the retailers in deep trouble – that are seeking help on rent. Vast, profitable businesses such as fast-fashion retailer Primark, sportswear chain JD Sports and Burger King are also refusing to pay their landlords the rent they are due.

One major problem is that the government has now allowed commercial tenants to delay rental payments for three months without fear of eviction. Some landlords are furious that certain tenants have interpreted this as permission not to pay.

Some £2.5bn in retail rents was due at the end of March, according to trade body the British Property Federation (BPF). The property industry, it says, cannot absorb vast losses, because landlords have debts to service.

Melanie Leech, chief executive of the BPF, is calling for government and regulators to work with lenders to help commercial property businesses. “As property owners offer relief to their tenants, there is a very strong case for lenders to provide debt service deferral to owners in return, to protect the 45 million savers and pensioners across the country whose money is invested in commercial property,” Leech said.

Some investors have already been caught up in the property-sector tumult. Investment managers BlackRock and Schroders have both suspended trading in their UK real estate funds, saying it was difficult to obtain an accurate valuation of their assets.

“Landlords” are treated as one group, although they vary enormously: some are private individuals, some are pension funds. And their approach to pursuing rental income varies also.

Property consultancy firm Lorenz Consultancy is currently involved in negotiations between more than 40 hospitality businesses based in London’s West End and their landlords. It says two-thirds of landlords are offering some flexibility. “You’ve got to have transparency between the tenant, landlords and financiers,” said Richard Russell at the consultancy. “The landlords want to protect income through this, but don’t want to be left with vacant units.”

Some of the country’s biggest landlords have offered tenants deferred or lower payments, which Cedrik Lachance, an analyst at the property consultancy Green Street, called a “partnership in pain”. “Landlords who are proactive will get better results over time,” he added.

Property firm British Land, which owns shopping centres including Sheffield’s Meadowhall, has scrapped rent between April and June for smaller tenants, and allowed larger firms to spread rent repayments.

A number of landlords, however, have called for their lawyers and are threatening immediate legal action. Intu, which has a £4.5bn debt pile and is fighting for survival, has already threatened some tenants with a statutory demand – a formal request for payment – if they do not pay.

An Intu spokesperson said: “We are happy to engage with brand customers on a case-by-case basis, but we have neither the desire or financial capacity to bankroll global, well-capitalised brands who have just decided they don’t want to pay their rent.”

A similar warning has been sent by Criterion Capital, which owns London properties including the Criterion Building on Piccadilly Circus, home for almost a century to the Lillywhites sports store, now operated by billionaire Mike Ashley’s Sports Direct chain. Its letter warns that non-payment of rent will lead to a winding-up petition.

“This is a sledgehammer to crack a nut and an entirely inappropriate use of the legal process, which will result in business collapse and administration,” said Kate Nicholls, chief executive of UK Hospitality, which represents the cafe and restaurant business. The trade body has written to the government asking for an extension to the ban on evictions, from three to six months. UK Hospitality wants the measures widened to prevent property owners from issuing winding-up petitions or statutory demands, a protection already introduced in Germany.

Russell at Lorenz also believes an extension is needed, as tenants and landlords are already discussing next quarter’s rent. He warns: “There will be a bloodbath in June if tenants are forced to pay double rent: lots could go to the wall.”


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