Landlords have feelings too: why the Government should support property owners
16th November 2020
The news that Nottingham and Nottinghamshire have had a fresh set of restrictions placed upon them raises the question as to whether the Government, at any point, has considered the impact this pandemic has had on commercial landlords?
Based on the current rescue packages, it would appear not. This is certainly not a dig at the Government, as I would not want to be in their position as they work to navigate these uncertain times; however, it is clear that there will be winners and losers. I cannot help but think that all the assistance has been geared too heavily towards tenants.
Initially, small businesses and the retail, leisure and hospitality sector received grants. The retail sector benefited from extended rate holidays and on 30th September the Government announced a further extension on the protection given to tenants by:
i) Extending the moratorium on the forfeiture of commercial leases until 31st December 2020.
ii) Changing the minimum level of arrears necessary to use commercial rent arrears recovery before 30th September 2020 to 276 days’ worth of rent.
iii) Extending the ban on statutory demands and Winding Up Petitions until 31st December 2020.
This announcement unfortunately prevents landlords and their Managing Agents from taking any affirmative action against tenants for non-payment of rent until 31st December even if a company is trading strongly and has just decided not to pay rather than not being able to pay.
The Government put together a Code of Practice for commercial property relationships during the Covid-19 pandemic, geared toward promoting sensible dialogue between landlords and tenants in order to reach reasonable solutions. Since lockdown started in March, this is something that the NG management team have strived to achieve. We have tried to ensure that we are communicating with all our tenants as often as possible and updating all our landlords on a regular basis. Communication has been the key and we have had a lot of success, but as the pandemic rages on, these conversations are becoming more and more strained as both parties are starting to feel the pinch.
There is a perception that if you own commercial property, you are well off and do not need the rent. This in the most part is not the case. Many of our clients have commitments that they still need to meet, with the ongoing rent payment crucial to meet those commitments, and in many cases the income they receive is what they have to live off.
My concern, now that we are in the 3rd rent quarter since lockdown began, and with the furlough scheme coming to an end, is that the financial stresses on businesses will start to take their toll. The list of businesses going into administration is growing by the day, meaning larger numbers of landlords will be left with the prospect of a vacant property, having received a reduced rent for the last nine months, or in some cases no rent. The likelihood of receiving any claim for dilapidations would have diminished and they would more than likely be left with huge clearance costs, only then to be faced with void rates, increased insurance and holding costs, while they deal with trying to find a new tenant in a depressed market.
The next 3 to 6 months is going to be extremely telling and NG will continue to communicate with our tenants to work out sensible solutions to ensure our clients continue to receive their rents. While the moratorium exists, there is a huge concern that tenants continue to withhold rent payments as there is little landlords can do about it, but in doing so fall into a position that is difficult to recover from. There are no winners in this scenario.
The Government and local Councils now need to be prepared for the fall out that is coming, and they need to start thinking about how they can help commercial landlords. Abolishing void rates would be a good starting point – but do not stop there; we need to make the properties attractive for new businesses and opportunities.