The British Retail Consortium (BRC) has warned that two-thirds of UK retailers could close as landlords become free to take legal action to recover rent arrears from July 1.
The Government-imposed moratorium on aggressive debt collection during the coronavirus pandemic will end on June 30 and landlords will be able to pursue retailers for rent arrears.
The BRC pointed out that with thousands of retailers forced to close for long periods over the past 15 months, many have accumulated huge debts that they can only now start to repay. Total rent debt is estimated to stand at between £2.9 billion and £4.5bn.
A survey carried out by the BRC found that across British retail as a whole, two-thirds of retailers had been told by landlords that they would face legal action from July.
For KBB retailers, unless the moratorium scheme is extended, it will mean that agreements must be reached with landlords over any arrears owed.
We surveyed our kbbreview100 think tank of retailers nationwide to find out their experiences.
Most who responded said they had succeeded in keeping up with rent payments during the pandemic and its lockdowns.
Richard Reynolds, chairman at CP Hart, which has 15 stores, told kbbreview that it had paid all but three of its 14 landlords and is in wider lease discussions with the remaining three.
Trevor Scott, chief executive of RFK in Rugby, said RFK had asked all three of its landlords for a three-month rent holiday back in March 2020, which they agreed to. RFK has since paid back all of its outstanding rents.
At KBB retailers association the KBSA, national chair Richard Hibbert said that among its members, many had negotiated rent reductions or rent-free periods or kept paying in full over the past 18 months. He said he was not aware of any making use of the provisions of the moratorium scheme.
Judging from the experience of our kbbreview100, KBB retailers seem to have fared pretty well so far, but of course the end of the moratorium does mean if there are any future disruptions to trade, that Government protection will not be there.
Do KBB retailers think the scheme should be extended?
Many of kbbreview100 thought so. Among them Dave Jarvis, owner of Albion Bathrooms Kitchens Electricals in Burton-on-Trent, who acknowledged that there will still be some firms in “dire financial straits” despite the uplift in business since reopening. Stefan Bomok, co-founder of Cu Cucine in Watlington, said “the debts for many people who were not in a positive situation will be horrendous”, and thought that loans should be made available to help spread the debts.
Most, however, did not see the need to extend the scheme. Jane Ive, design director at the Bathroom Design Studio in Harrogate, said: “The marketplace has been so buoyant that if a business needs the scheme to survive, it probably is no longer a viable business.”
John Pelosi, owner of the Caldicot Kitchen and Bathroom Centre, pointed out that landlords had been adversely affected too by the enforced shutdowns and expressed the hope that there could be “a happy medium where landlords and tenants try to do right by each other and support each other”.
The moratorium on business evictions was put in place in March 2020 and in June that year, the Government introduced its Code of Practice for Commercial Property Relationships During the Covid-19 Pandemic. This meant a moratorium on forfeitures and associated measures for tenant business, and making available over £330bn of guaranteed loans.
The BRC has called for action from the Government to give retailers breathing space by ring-fencing debts that have accumulated during the pandemic.
Said BRC chief executive Helen Dickinson: “Many retailers have taken a battering over the pandemic, but they are now getting back on their feet and playing their part in reinvigorating the economy. The unpaid rents accrued during the pandemic, when most shops were shut, are a £2.9 billion ball and chain that hold back growth and investment and could result in a tsunami of closures.
“Government must ring-fence the rent debts built up during the pandemic, giving retailers breathing space as they wait for footfall and cash flows to return. With this in place, all parties can work on a sustainable long-term solution, one that shares the pain wrought by the pandemic more equally between landlords and tenants. Without action, it will be our city centres, our high streets and our shopping centres that suffer the consequences, holding back the wider economic recovery.”
Supporting the end of the moratorium, Martin Leech, chief executive of the British Property Federation, said in May: “The moratoriums must end and normal market conditions must return. The future of our town centres depends on this – the commercial property sector requires certainty of income to create the modern, fit-for-purpose town centres that will play a major role in economic, social and environmental recovery.
“Property owners want to continue to support those tenants in genuine distress, and we will work with the Government if necessary to provide additional reassurances to the minority of tenants who have not already reached agreement with their property owner about how their debts will be dealt with.”
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