Commercial rent issues during Coronavirus (COVID-19) Global Pandemic

The Pandemic, which has been declared a global pandemic by the World Health Organisation and the UK Government and has already had a profound impact globally and here in the UK. The British Government has imposed what they
themselves call the most far-reaching measures the population has experienced in peacetime and has described the economic fight as the greatest in peacetime.

The impact of the Pandemic on current trading conditions and the prevailing economic climate is unprecedented and provides a serious threat to the survival of several businesses. This is particularly the case with the hospitality and leisure industry, which faces a truly existential threat especially given the guidance from the Government on 16 March 2020 that everyone must, where possible, work from home and must avoid pubs, clubs, theatres and other such social venues and must stop non-essential travel in an effort to reduce the impact of the Coronavirus.

As a result of the Pandemic, our ability to perform our obligations under their landlord’s Lease is significantly impacted. This is not the direct consequence of any action or inaction taken by us, but rather the result of an event completely outside our control.

Whilst as a business we are all taking reasonable steps to avoid, or at least reduce so far as possible, the effects of the Coronavirus upon our work force and our ability to continue to perform contracts including Landlord Leases, it is simply not possible for us to mitigate entirely the effects of the Pandemic upon our trading conditions.

Current concessionary arrangements and government support trading conditions for the industry is far from normal at present, and it is generally expected to remain negative or non-existent for the foreseeable future. For the industry to maintain a workable and viable business at their premises, we have attempted to propose a concessionary arrangement by reference to their rights under their respective lease which asked for a concessionary suspension arrangement of sum reserved as rent due under their lease.

Some Landlords subsequently agreed to concessionary suspension arrangements however the government support has not been enough. Current measures including a 3,6 0r 9-month moratorium on forfeiture for non-payment of rent and/ or a 90 day stay of possession proceedings are not enough to ensure the future of many businesses. Furthermore, many landlords are still attempting to enforce all terms of their rights under their lease.

BEIS have announced legislative amendments designed to give enhanced protection against the use of debt enforcement measure in the event of non payment of rent. These measures still fall short of what commercial tenants require over this crisis period through potentially accumulating unsustainable levels of debt.

Our preference would be to gain government support in hibernating the transactional process between Lenders and landlords, and landlords and tenants , allowing the tenants the financial freedom to optimise cashflow over the enforced closure period where the businesses within the Night-time Economy Sector will be able to focus on preparing for exit strategy when the time is right.

Our Industry, as highlighted publicly many times has been subject to unprecedented circumstances and will be one of the last industry sectors to open, therefore will require additional support to ensure they are able to survive the period of closure. In terms of figures rent generally is 10% of revenue – which given that the NTE annual revenue is circa 66 Billion – We would be looking at a proportionate commitment from the government of 6.7 Billion.

Survey Factors:

  • 1154 Surveys were completed – from the Nighttime Economy Sector Businesses
  • 355 Surveys were analysed l- Based on SME Operations across the UK – Under 250 Employees
  • Representing over 3000 Businesses & Over 150,000 Employees

Quick View

  • 45% of landlords within Survey have offered no Support to businesses
  • 45% of Business will not last longer than 3 months under current measures
  • 75% Will default with no reserves for rent

Click below to access the full report:

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