UK faces ‘blood on the carpet’ of over £ 6bn in rent arrears

The UK government is under pressure to resolve a £ 6bn rent arrears crisis and prevent a deluge of legal disputes between commercial tenants and landlords, before a temporary ban on evictions next month.

“If the government does nothing, you will have blood on the carpet. All you need is one owner to trigger the full payment requirement and the whole business could fall, ”said Kate Nicholls, head of UKHospitality, the trade body.

The ban has prevented evictions since its introduction in March 2020, but ends on June 30.

In a letter sent to Housing Secretary Robert Jenrick on Friday which was seen by the Financial Times, UKHospitality argued that “there is a moral obligation on landlords. . . make rent concessions to businesses forced to close ”.

He suggests the government should extend the moratorium on evictions until December to allow businesses to recover after the foreclosure ends and develop a loss-sharing arbitration process between tenants and landlords with at least 50 % of the rent debt written off.

Hospitality and retail are among the most affected sectors by the pandemic, having been stopped for long periods.

UKHospitality estimates £ 2bn in rent is owed by hotel companies, with 40% of locals still negotiating the current unpaid rent with landlords. Another 20 to 30 percent are still in discussions on how to settle debts from last year’s lockdowns, he said.

Ministers asked tenants and landlords for their views on six potential leads, with bids due by Tuesday. These range from simply ending the eviction ban to an arbitration process binding on landlords and tenants.

A group of owners, led by British Land, Real estate securities and the trading body, the British Property Federation, put forward their own proposal on Thursday. They argue that businesses should pay rent from the end of June, when trading will resume as part of the government’s plans to reopen.

They also propose that unpaid rents accumulated since March 2020 be locked in and tenants protected until the end of 2021, giving them time to reach agreements on how much will be written off, deferred or paid.

If a settlement cannot be reached, the owners offer a binding arbitration process. “At the end of the day, you need something to get people to the table,” said Mark Allan, Managing Director of Landsec.

Hotel companies say their recovery could be crippled by having to pay rent so soon after being allowed to fully reopen on June 21, combined with the business rate vacations that also end at the end of June. .

Peter Thornton, chief financial officer of Piano Works, which runs two bars in London, said they had rent arrears of £ 687,000 and had not come to an agreement with either of the their two owners on when or how the money should be paid. “We have a huge financial risk once we come back and trade. . . we are at the mercy of the owner, ”he said.

David Abramson, managing director of commercial property consulting firm Cedar Dean, said the problem was particularly acute for small businesses that lacked the resources to employ advisors to negotiate with homeowners.

Several large companies, including New Look and The Restaurant Group, have undergone administrative processes that have forced landlords to cut rents. But in the past fortnight, two High Court judgments have ruled that tenants, including Sports Direct, Mecca Bingo and Cineworld, will have to pay the arrears.

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