Push comes to shove for commercial landlords and tenants
Centuries old practices will fall by the wayside, to be replaced by new structures and codes that have only come of age in the past few weeks – Zoom meetings anybody?
Received wisdom will be reexamined and while some customs and rules will remain, others will be looked back on with a mixture of amusement and bewilderment that they were followed for so long.
We doubted that paying rent would be one of these however, but these are strange days.
Firstly, we covered how some retailers such as Boots and Matalan have taken issues into their own hands and refused to pay rent for this Q2 2020 which came due earlier this month.
The landlords of Boots in particular are particularly aggrieved as the store is classified as an essential business so remains open and generating some income and sales during this period.
One of the landlords said: “We’re trying to support the little guy, the small independent traders whose sole income is through the cash register. I said to Boots – my ability to help those people is directly related to the people who could and should pay rent, paying that rent.”
Then there were reports that other retailers beginning with the Edinburgh Woollen Mill chain of retailers are including pandemic clauses into any new leases it’s due to sign with landlords of Bonmarche stores that their owner, Philip Day, brought out of administration last year.
The clauses would mean that EWM could agree on new Bonmarche store leases without having to pay any rents upfront until the lockdown is lifted and non-essential stores can reopen for business.
This also means that the company will be refunded any rent payments by their landlords should another pandemic hit in the future.
It seems that the authorities have been paying attention because the government has now banned landlords from using the threat of statutory demands and winding-up orders to claim any unpaid rent due to the crisis.
Commercial tenants also have the option to delay full rent payments unless they are already three months in arrears.
Section 82 of the Coronavirus Act 2020 already prohibits the forfeiture of commercial leases until 30 June 2020 (or longer if the government deems necessary) specifically for non-payment of rent.
As written, the law didn’t prevent other actions including recognised debt recovery devices until the new measures were introduced.
While some businesses have no revenue coming in, the government hoped that landlords would have some forbearance and look to cooperate with their otherwise profitable tenants.
The reality is that some landlords decided to take strong measures first because they were also struggling for income from tenants, some of whom aren’t reciprocating openly themselves.
A new business world is coming.
It might be weeks or months away but it will arrive and bring a host of changes with it.
Rent boycotts, debt recovery bans and niche rental clauses may be the first outliers of an evolving environment but they certainly won’t be the last.
You need to start thinking about how your business is going to adapt to a new environment when it becomes time to open up permanently again.
Where will you have a strong advantage? Where will you be in danger of being outflanked and left vulnerable? What part of your company will need evolution and which revolution?
We’re used to asking questions that need more than a yes or no answer and make you really think about what you and your business will need going ahead so you can re-emerge with all systems go.